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ACA Pathways: IRS Releases 2020 ACA Reporting Forms and Instructions and Update on California Individual Mandate Reporting

October 20, 2020

The Internal Revenue Service (IRS) has released 2020 forms and instructions for reporting under Internal Revenue Code (Code) Sections 6055 and 6056.

The Forms 1094-C and 1095-C and related instructions will be used to report under Code Section 6056, as well as for combined Code Section 6055 and 6056 reporting by applicable large employers (ALEs) who sponsor self-insured plans.

The Forms 1094-B and 1095-B and related instructions will be used by providers of minimum essential coverage (MEC), including self-insured plan sponsors that are not ALEs, to report under Code Section 6055.

State Individual Mandate Reporting

Last month the State of California released draft instructions for filing the Federal Forms 1094 and 1095 to comply with its individual mandate requirement. In particular, employers who sponsor self-insured plans with employees residing in California will have to file either the Forms 1094-C/1095-C or the Forms 1094-B/1095-B, as the case may be, with the Franchise Tax Board by March 31, 2021, although there will be an automatic two month extension if the draft instructions are finalized in their current version. As under Federal law requirements, the insurance carrier will have the filing responsibility on behalf of employers with employees in fully insured health plans. The draft instructions are available here and here, respectively. Information regarding the State’s Minimum Essential Coverage (MEC) Information Reporting (IR) Program is available here.

In addition, employers with employees residing in Massachusetts, New Jersey, Rhode Island, Vermont, and the District of Columbia may also need to file with the respective state agency in which the employee resides to demonstrate compliance with that state’s individual mandate reporting requirement.

Significant Changes To Forms 1095-B and 1095-C

A significant number of changes and clarifications were made related to 2020 reporting.

  • The due date for furnishing Forms 1095-B and 1095-C to individuals has been extended from January 31, 2021 to March 2, 2021 (See our October 6, 2020 ACA Pathways). The deadline for filing with the IRS, however, remains February 28, 2021 (March 31, 2021, if filing electronically).
  • The IRS has extended relief from penalties for failure to furnish individual statements under Section 6055 for 2020 calendar year reporting. Specifically, the IRS will not impose a penalty for reporting entities that furnish Form 1095-B to individuals only upon request, if certain conditions are met (See our October 6, 2020 ACA Pathways).
  • The IRS has also extended good faith relief from penalties related to 2020 calendar year reporting. Specifically, the IRS will not impose a penalty for reporting incorrect or incomplete information on the Forms 1095-B or 1095-C, as applicable, if the reporting entity makes a good faith effort to comply with the information reporting requirements (See our October 6, 2020 ACA Pathways).
  • A new code G must be entered on Form 1095-B, line 8 “Origin of Health Coverage,” to identify an individual coverage health reimbursement arrangement (ICHRA).
  • In addition, the Form 1095-C has been modified to include several changes for 2020 reporting:
    • The “Plan Start Month” box on the 1095-C is no longer optional and is now required.
    • The “Employee’s Age as of January 1” is a new required field.
    • There are additional Code Series 1 codes related to offers of ICHRAs (see below).
    • There is a new Line 17 in Part II of the Form 1095-C to enter the zip code used by the employer for determining affordability of an ICHRA if one was offered to the employee.

New ICHRA Codes

As indicated above, certain additions were made to the 2020 draft Forms 1095-B and 1095-C related to ICHRAs. Specifically, the draft Form 1095-B includes an additional letter for line 8 to identify the origin of the health coverage- Letter G indicates coverage under an ICHRA. In addition, the 2020 Form 1095-C includes the following additional codes in Code Series 1 (for use on Line 14 in Part II of the Form 1095-C):

  • 1L. ICHRA offered to employee only with affordability determined by using employee’s primary residence location zip code.
  • 1M. ICHRA offered to employee and dependent(s) (not spouse) with affordability determined by using employee’s primary residence location zip code.
  • 1N. ICHRA offered to employee, spouse and dependent(s) with affordability determined by using employee’s primary residence location zip code.
  • 1O. ICHRA offered to employee only using the employee’s primary employment site zip code affordability safe harbor.
  • 1P. ICHRA offered to employee and dependent(s) (not spouse) using the employee’s primary employment site zip code affordability safe harbor.
  • 1Q. ICHRA offered to employee, spouse and dependent(s) using the employee’s primary employment site zip code affordability safe harbor.
  • 1R. ICHRA that is NOT affordable offered to employee; employee and spouse or dependent(s); or employee, spouse and dependents.
  • 1S. ICHRA offered to an individual who was not a full-time employee.
  • 1T-1Z. Reserved for future use.

Next Steps

Employers should familiarize themselves with the changes to the 2020 Forms and work with their payroll and ACA reporting vendors to confirm that their systems accommodate these modifications. Those with employees in states with individual mandate requirements should also consult with their ACA reporting vendor to confirm their system have the capacity to comply with the various states’ filing requirements and make enhancements as necessary.

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits
949.833.2983
inquiries@burnhambenefits.com

Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.

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