The IRS has released draft Forms 1094-C and 1095-C for the 2020 tax year. These forms are to be filed in early 2021 by applicable large employers (ALEs) to report whether an offer of health coverage was made to each full-time employee and if so, to provide information about the offer of coverage. Additionally, ALEs that sponsor self-funded health plans will include information on which employees and dependents were covered during each month of the year.
While the related instructions to these draft forms have not yet been released, there are some changes noted on the forms:
- There is a new field to enter the employee’s age on January 1. At this time, it is unclear whether this field will be optional or mandatory. The instructions, once released, should address this.
- There are additional codes that can be used on Line 14 relative to the offer of coverage made to an employee. The additional codes are all related to offers of an individual coverage health reimbursement arrangement (ICHRA).
- There is a new section to enter the zip code used by the employer to determine affordability for those employees who were offered an ICHRA. It seems likely that the zip code field will only need to be completed for those employees who were offered an ICHRA. This should be addressed by the instructions, once they are released.
What Is an ICHRA?
An ICHRA is a type of health reimbursement arrangement (HRA). It allows employers to reimburse the cost of individual market premiums on a tax-preferred basis, subject to certain conditions, as an alternative to traditional group health plan coverage. ICHRAs became available on January 1, 2020.
For more information on ICHRAs, refer to our prior blog post here.
Forms 1094-B and 1095-B
The IRS has not yet released the 2020 draft Forms 1094-B and 1095-B, to be used by entities that are not applicable large employers, yet are providers of minimum essential coverage. This includes insurance carriers and self-funded employers that are not ALEs.
ALEs should familiarize themselves with these forms, including the new field for the employee’s age as of January 1. As stated above, it is not yet known whether this new field will be mandatory or optional for 2020.
Additionally, employers who offer ICHRAs to their employees should be prepared to report on the type of ICHRA offered based on the new codes available, as well as the zip code used to determine affordability.
Note the IRS may make additional changes to these forms before releasing them in final format. Therefore, employers should not use these forms for reporting, but rather, should wait until the final 2020 versions are released.
Hylant will continue to monitor information published by the IRS, including the draft instructions for these Forms 1094-C and 1095-C, as well as the draft Forms 1094-B and 1095-B and related instructions.
Reach out to your Hylant representative for further information.
The above information does not constitute advice. Always contact your employee benefits broker or trusted adviser for insurance-related questions.