ACA Reporting Case Scenarios: How to Report an Accepted Offer of COBRA Coverage on the 1095-C
If you have started down the worm-hole of completing your annual 1095-C statements, you’ve probably hit some confusion upon reaching Part II. With 9 coded options to plugin for each month of line 14 (1A-1I) and eight coded options for line 16 (2A-2H), things can start to get tricky.
The standard majority of cases are not the problems. Rather, it’s the odd-ball scenarios that generate the biggest stalls in 1095-C production, causing most to flee to google for guidance on their specific scenario. In this case, we will be looking at how an accepted offer of COBRA coverage impacts the 1095-C.
At Benetech, we will be publishing a series of 1095-C case scenarios over the coming months as we enter into the first round of annual reporting. At the end of the blog will be the option to submit your specific 1095-C case that is causing you the most heartburn, and we’ll work on answering as much as we can in the coming months. The more you submit, the more we will research and write.
This blog has been updated as of September 30 due to updated IRS ACA reporting instructions. Specifically, for reporting COBRA eletions, the IRS has updated the line 14, 15, and 16 codes to reflect that terminated employees that elect COBRA coverage are properly categorized as non-employees, and no longer included in the employer's 95% test for those months in which the employee was enrolled in COBRA as a non-employee. Of note, the IRS regulations have been updated, but at present, the IRS has not updated case-scenarios under their 1095-C FAQs. The IRS pointed this out specifically in a recent AIR webinar to third-party reporting agencies. (See IRS 1095-C Reporting Instructions)
Scenario 3: Steve is a full-time employee (FTE) of ABC Corporation and received an offer of minimum essential coverage (MEC) providing minimum value for dependents and his spouse. ABC Corporation offers a self-insured health plan, and Steve renewed his coverage on January 1, 2015. On June 15, Steve terminated employment. ABC Corp offered Steve COBRA, and he accepted.
This is how ABC Corp will complete Steve’s 1095-C.
Why: Once Steve terminated coverage, he was no longer a full-time employee for an entire calendar month, and ABC Corporation was no longer required to extend an offer of coverage beyond Steve's termination date. For June through December, Steve's line 14 code will be 1H (No offer of coverage).
Steve's line 15 contribution amount for single coverage only minimum essential coverage available to Steve will be recorded for January through May. For June-December, ABC Corporation will leave line 15 blank. A value for line 15 is only included when there is 1B, 1C, 1D, or 1E in line 14 for the corresponding month. Because June-December is a 1H, there is no corresponding value included in line 15 for those months.
Steve's line 16 will be 2C (employee enrolled in coverage offered) for months January-May. Because Steve terminated midway through June, but his coverage would have continued had Steve not voluntarily terminated coverage, code 2B is entered in line 16 for the month of June. For July through December, Steve will have code 2A (not an employee during this month).
Steve's Part III would look as follows:
Steve's family is shown as covered through December, because ABC Corporation is required to check each box in which Steve and his dependents had at least one day of coverage during the corresponding calendar month. In this case, Steve and his family remained covered in the employer's plan through COBRA.
If Steve had elected self-only COBRA coverage, then his Part III would remain the same as above, but his spouse and dependents would have blank boxes for July-December, those months they were not enrolled for at least one day in the employer-sponsored plan. See the example below.
Related Blog: How to Report on Terminated Employees on the 1095-C
Thank you for the continued submissions. Again, the more you submit, the more we will write!
This blog is not intended to be legal advice nor should any discussion or opinion be construed as legal advice. Redears should contact legal counsel for legal advice.