Skip to content
Benefits

IRS Issues Draft ACA Reporting Forms and Updates Indexed Employer Shared Responsibility Amounts

EBIA  

EBIA  

Draft 2020 Forms 1094-B, 1095-B, 1094-C, and 1095-C; IRS Webpage: Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act

1094-B

1095-B

1094-C

1095-C

Webpage

The IRS has updated its Q&A guidance to reflect indexing adjustments applicable to the employer shared responsibility provisions of the Affordable Care Act (ACA). One question (Q/A-55) updates the annual per-employee penalties under Code § 4980H for the 2021 calendar year. The subsection (a) penalty, which may apply when an applicable large employer (ALE) fails to offer minimum essential coverage to at least 95% of its full-time employees, will increase to $2,700 (up from $2,570 for 2020). The subsection (b) penalty, which may apply when an ALE offers minimum essential coverage to the required percentage of full-time employees but the offered coverage either is unaffordable or does not provide minimum value, will increase to $4,060 (up from $3,860 for 2020). Another question (Q/A-40) verifies that the previously announced affordability percentage will be 9.83% for plan years beginning in 2021 (up from 9.78% for plan years beginning in 2020) (see our Checkpoint article).

The IRS has also released draft ACA information reporting forms for 2020. As a reminder, Forms 1094-B and 1095-B are filed by minimum essential coverage providers (mostly insurers and government-sponsored programs, but also some self-insuring employers and others) to report coverage information in accordance with Code § 6055. Forms 1094-C and 1095-C are filed by ALEs to comply with Code § 6056, providing information that the IRS needs to administer employer shared responsibility penalties and eligibility for premium tax credits. The draft forms are similar to those for 2019, but they reflect availability of individual coverage HRAs (ICHRAs) starting in 2020 (see our Checkpoint article). An ICHRA code has been added to the coverage codes on Form 1095-B. ICHRA codes have also been added to Form 1095-C, in addition to fields for the employee’s age and ZIP code (information used to determine whether the ICHRA is deemed to provide affordable coverage).

EBIA Comment: Release of the draft reporting forms reminds us that the 2020 filing season is fast approaching. We won’t understand the full implications of ICHRA reporting until instructions are issued. ALEs that elected to offer ICHRAs for 2020 should watch for these instructions and other guidance. In addition, many ALEs will face reporting challenges for 2020 due to employment decisions made in response to COVID-19, which may affect employees’ full-time, part-time, or termination status as well as their eligibility for coverage. Because indexing increases the employer shared responsibility penalties, the stakes for ALEs are higher every year. For more information, see EBIA’s Health Care Reform manual at Sections XXVIII (“Shared Responsibility for Employers (Play or Pay Penalty Tax)”), XXXVI.C (“Information Reporting of Minimum Essential Coverage (Insurers and Employers That Self-Insure)”), and XXXVI.D (“Information Reporting of Employer-Sponsored Coverage (Applicable Large Employers)”). Also, watch for updates to EBIA’s Form 1094/1095 Workbook at Section VIII (“Form 1095-C Report/Employee Statement: Employer-Provided Health Insurance Offer and Coverage”).

Contributing Editors: EBIA Staff.

More answers