QUESTION: We are an applicable large employer (ALE) operating a retail business. Many of our new hires have variable work schedules, and it is not clear at the time of hire whether they will be full-time employees. We use the look-back measurement method and offer coverage (which is affordable and provides minimum value) to full-time employees under our fully insured health plan at the end of the initial measurement period. How do we complete Form 1095-C for new employees in an initial measurement period, before we know their full-time status?
ANSWER: You will use Code 1H (no coverage offer) on line 14 and Code 2D (limited non-assessment period) on line 16 during the initial measurement period.
As background, ALEs can determine full-time employee status for purposes of employer shared responsibility (Code § 4980H) using either the monthly measurement method or the look-back measurement method. The look-back measurement method is suited to ALEs with workforces—like yours—that experience substantial variability in work schedules. Hours are calculated during measurement periods ranging from 3 to 12 months, and those calculations are used to lock in an employee’s full-time or part-time status during a corresponding stability period. Under this method, an initial measurement period applies to newly hired employees for whom it is not reasonably possible, at the time of hire, to determine whether they will work full-time hours (“variable-hour employees”).
Because you do not offer coverage to variable-hour employees during their initial measurement period, you will have to enter Code 1H on line 14 of Form 1095-C. However, so long as variable-hour employees are otherwise eligible for your group health plan during the initial measurement period (i.e., they satisfy all eligibility criteria except for completion of an eligibility waiting period) and minimum-value coverage is offered to full-time employees by the first day of their initial stability period, the initial measurement period is treated as a limited non-assessment period under Code § 4980H(b). This status allows you to enter Code 2D on line 16 and will protect you from Code § 4980H penalties with respect to these employees, even though you did not offer them coverage.
You do not have to complete a Form 1095-C for an employee who was in a limited non-assessment period for all months of employment during a calendar year. For example, if you use a 12-month initial measurement period and an employee was hired on March 1, 2018, you would not need to complete a 2018 Form 1095-C for that employee. The employee would not have full-time status for any month during the 2018 calendar year.
For more information, see EBIA’s Form 1094/1095 Workbook at Section VIII.C(“Completing Form 1095-C”). See also EBIA’s Health Care Reform manual at Sections XXVIII.C.4 (“Look-Back Measurement Method for Determining Full-Time Employee Status”) and XXXVI.C (“Information Reporting for Employer-Sponsored Coverage (Applicable Large Employers)”). You may also be interested in our upcoming webinar “Form 1094/1095 Reporting for 2019” (live on 12/4/19).
Contributing Editors: EBIA Staff.