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Line By Line Breakdown For ACA Codes

aca code breakdown

Line By Line Breakdown For ACA Codes

Each year Applicable Large Employers (employers with more than 50 full-time employees) must furnish and file forms 1094-C and 1095C to the IRS and their employees. These forms are used to show offers of health insurance coverage to applicable employees. Many employers get confused as to what the set of codes mean on the forms, so we’ve broken them down below for your convenience. It is important to note that the forms are all about the offer of coverage made to the employee for compliant, employee only coverage, not what the employee actually paid. Many employers get this confused when employees opt into higher tier plans or plans that also cover the employees’ dependents.

There are three lines of codes on the 1095C form to understand.

Line 14: The line 14 codes are based on what the Employer did that particular month.

1A: This code is called the Qualifying Offer Method and is used when the employer offered Minimum Essential Coverage that also provided Minimum Value and was affordable based on the Federal Poverty Line Safe Harbor.

1B: Code 1B represents that the Employer offered both Minimum Essential Coverage providing Minimum Value, but this was only offered to the employees and not their dependents

1C: Code 1C means the employer offered Minimum Essential Coverage providing Minimum Value to the employee and their children, but not spouses.

1D: Code 1D indicates that Minimum Essential Coverage providing Minimum Value was offered to the employees and their spouses, and not their children

1E: This code tells the IRS that the organization offered Minimum Essential Coverage providing Minimum Value to the employee, their dependents, and their spouse. The difference between code 1A and 1E is that you can only use code 1A when your health plan is considered affordable based on the federal poverty line safe harbor.

1F: Code 1F indicates that the employer offered a plan that included Minimum Essential Coverage that did not provide Minimum Value.

1G: Code 1G tells the IRS that coverage was offered to an employee on a self-insured plan that was not considered full time.

1H: Code 1H indicates that no offer of coverage was made to the employee, or an offer was made without providing Minimum Essential Coverage.

Line 15 is surprisingly one of the most common lines that employers get confused. Line 15 is the amount the employee would have paid had that enrolled in employee only coverage. Many employers think what the employee paid goes on line 15, but that is not the case. If the employee enrolled in a family plan, or a plan that covered dependents, you do not have to report their portion of that plan. Only what they could have paid on an employee-only plan.

Line 16 contains the 2-series codes, which are generally what happened to the employee that particular month.

2A: Code 2A simply means that the employee was not employed that particular month.

2B: This code means the employee was not full-time, or not a full-time employee every day of that month.

2C: Code 2C means the employee enrolled in coverage regardless of whether or not the coverage was AA compliant.

2D: This code indicates the employee is in a “Limited Non-assessment Period” or “waiting period”, and their full-time/part-time status has not yet been determined.

2E: Code 2E means the employee was unionized and has an established multi-employer plan.

2F: This code is the first of the safe harbors. Code 2F is the W-2 safe harbor, which is used to determine affordability for the employee.

2G: Code 2G is the Federal Poverty Line Safe Harbor, used to show a plan was affordable.

2H: This is the Rate of Pay safe harbor when proving the plan was affordable.

Employers should be sure to have a knowledgeable solution to correctly code their 1095C forms.

30 Million Jobless Last 6 weeks, 30 million Without Healthcare

jobless claims

The coronavirus pandemic has caused an additional 3.84 million job loss claims, totaling over 30 million
since the pandemic began in mid-March. As part of the worst employment crisis in U.S. history, jobless
claims hit almost 7 million for the week of March 28th and have been declining each week since.

Continuing job loss claims rose to 18 million, which was a rise of over 2 million from the previous week.
This surge of unemployment is due to attempts at containing the coronavirus spread. Some states and
municipalities are beginning to open their economies back up, most of the U.S. infrastructure remains
on lockdown. The unemployment filings are extensive and causing trouble for state office claims filers
with so many pending applications. The Economic Policy Institute early this week estimated that the
current unemployment claims level is most likely undercounted by over 10 million because there are
eligible citizens unable to file due to obstructions preventing them from filing.

We believe this may be incredibly important regarding the Affordable Care Act. With health insurance
usually being tied to one’s employer, you can make the case that a large portion of the newly jobless 30
million US citizens may be applying for coverage through the Health Exchange if they are unable to find
new jobs. This means that the IRS will be more motivated than ever to assess and assign as many
penalties as possible to recoup the lost money from providing subsidized healthcare. Additionally, these
layoffs may confuse employers because they will think their ALE status might be lost when they go
below 50 employees, but a common misconception about the ACA is your filing status is actually based
on the previous year’s ALE status. This means that organizations who drop below 50 full time equivalent
employees during the COVID-19 crisis will still be on the hook for reporting requirements for the 2021
filing date and may not know it.

It is important to stay informed on your groups ALE status, and other ACA filing requirements, because
the last thing any organization needs right now during this crisis is to receive a hefty l226J penalty letter
from the IRS for hundreds of thousands of dollars.

ACA Penalties Don’t Go Away

aca penalties

Don’t Get Caught With Non-Compliance

The IRS released a “Field Notice” on February 24 th , 2020 stating that there is no statute of limitations for
the assessment of an Employer Shared Responsibility Payment (“ESRP”) under Internal Revenue Code
Section §4980H. This means that employers who were wishing to avoid ACA reporting for a few years
after its initial release in the hopes that it would “go away”, now have a statute stating they are on the
hook indefinitely.

The IRS can assess a penalty under section code §4980H to any employer with 50 or more full-time
employees (also known as Applicable Large Employers) who fail to offer Minimum Essential Coverage
providing Minimum Value to at least 95% or more of their full-time employee population. This means
now more than ever it is important for employers to comply with the ACA in its entirety, as the standard
“3 to 7 year” rule with normal audit and tax filing (normally under section code §6501), does not apply
to the ACA.

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  • How are the medical and pharmacy claims trending for each plan? What about network performance?
  • How are claims trending for conditions such as cancer or diabetes?
  • Which providers are the most expensive in an area?
  • Are there opportunities to ‘drive’ services from one provider to a lower cost provider, such as from an emergency room to an urgent care facility?

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IRS continues to lay the groundwork for 2016 ACA reporting penalties

By now, many employers have received penalty assessments (Letter 226J) for noncompliance with the employer mandate in the tax year 2015. These penalty letters where not issues until Nov 1st of 2017. However, U.S. Treasury Inspector General for Tax Administration (TIGTA) reports from this year show that the IRS is gearing up to begin issuing penalty letters for the 2016 tax year very soon.

At Sky Insurance Tech, we do a good deal of penalty consulting for prospective clients. These are almost always clients that did their reporting with a lower priced, sub-par vendor, if they did their reporting at all. Recently, we have been getting a ton of phone calls regarding letter 5699 from the IRS for the 2016 tax year.

Letter 5699 is what the IRS uses to inquire about an employer’s reason for not properly filing their forms 1094/1095C. Employers who receive this letter have 30 days to respond. If the employer cannot prove that the letter was sent in error, then there is serious consequence, including a letter 226J for the 2016 tax year.

The IRS didn’t issue 2015 letter 226J penalty assessments until November 1st of 2017. However, November 1st of 2018 is right around the corner, which is the time frame we are expecting to see the 2016 penalty letters released. It is also important to note that just because the 2016 notices are set to be issued, this does not mean that the 2015 notices are finished being distributed.

For these reasons we encourage employers to revisit their previous year’s filings. Make sure that these were both accurate and timely.

If assistance is needed with either previous reporting years, or with penalty notices from the IRS, we are here to help.