IRS Releases 2020 Forms 1094/1095 and Related Instructions, Including New Rules for ICHRA Reporting

The IRS has released final Forms 1094/1095-B (B Forms) and Forms 1094/1095-C (C Forms), and related instructions, for the 2020 tax year. As a reminder, the B Forms 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. The C Forms are filed by applicable large employers (ALEs) to comply with Code § 6056, providing information that the IRS needs to administer employer shared responsibility under Code § 4980H and eligibility for premium tax credits. In addition to being filed with the IRS, Forms 1095-B and 1095-C are furnished to individuals. ALEs with self-insured health plans report coverage information on Form 1095‑C.

Except for information related to individual coverage HRAs (ICHRAs) (see our Checkpoint article), the forms and instructions are mostly unchanged for 2020. Non-ICHRA changes include making completion of the Plan Start Month box mandatory on Form 1095-C for the first time. The Form 1095-C instructions note that the Code § 4980H(b) affordability threshold for plan years beginning in 2020 is 9.78% (see our Checkpoint article). Both sets of instructions indicate indexed penalty increases for reporting failures from $270 to $280 per return, with calendar-year maximum penalties increasing from $3,339,000 to $3,392,000. Due dates have been updated and reflect the extension for furnishing individual statements to March 2, 2021 (see our Checkpoint article).

Highlights related to ICHRAs include—

• Form 1095-B. A new Code G will be entered on line 8 to identify an ICHRA as the source of employer-sponsored coverage.
• Form 1094-C. The instructions confirm that an offer of ICHRA coverage counts as an offer of minimum essential coverage for purposes of Code § 4980H(a).
• Form 1095-C. Line 14 codes will indicate information about ICHRA coverage offered to employees, including (1) the full-time or part-time status of the employee receiving the offer; (2) whether ICHRA coverage was also offered to a full-time employee’s spouse and dependents; (3) affordability of ICHRA coverage offered to a full-time employee; and (4) whether the employee’s primary residence or employment site was used to determine affordability. If the ALE indicated that the employee received an ICHRA offer, the employee’s age as of January 1, 2020, must be entered in a new field in Part II of the form. If an affordable ICHRA was offered to a full-time employee, the zip code for the employee’s primary residence or employment site will be entered on line 17. The instructions explain how age and zip code information—in combination with the ALE’s ICHRA contributions—is used to calculate a full-time employee’s required contribution for line 15. The employee’s contribution is based on the lowest cost silver plan for the employee’s age offered through an Exchange for the zip code of the employee’s primary residence (or primary site of employment if the ALE elects to use a safe harbor). The instructions caution that for non-calendar-year plans or employees who become eligible for the ICHRA during the plan year, the employee’s age reported in Part II may not be the applicable age to calculate ICHRA affordability or the amount reported on line 15.

EBIA Comment: Happily, there’s no October surprise in the forms and instructions—but all ALEs should note the new requirement to report the start month of the plan year on Form 1095-C and read the instructions carefully since there are some nuances. ALEs that offered ICHRAs in 2020 will have to collect and report information the IRS needs to evaluate ICHRA affordability. Notably, the instructions indicate that an ALE must report the age of any employee receiving an ICHRA offer, while other ICHRA information is required only for full-time employees receiving an offer of affordable ICHRA coverage. For more information, watch for updates to EBIA’s Form 1094/1095 Workbook at Sections VII (“Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns”) and VIII (“Form 1095-C Report/Employee Statement: Employer-Provided Health Insurance Offer and Coverage”). See also EBIA’s Health Care Reform manual at Sections 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)”). And watch for registration information for our December webinar, “Form 1094/1095 Reporting for 2020.”

Contributing Editors: EBIA Staff.