1094-B

1095-B

1094-C

1095-C

B Instructions

C Instructions

The IRS has released final Forms 1094 and 1095 and accompanying instructions for 2015. The 2015 forms will be used for mandatory filings first required in early 2016 to enforce Code § 4980H employer penalties, as well as individual mandate and tax credit eligibility rules. As background, the “B Forms” (1094-B and 1095-B) are filed by providers of health coverage (mostly insurers but also some self-insuring employers and others), and the “C Forms” (1094-C and 1095-C) are filed by applicable large employers (ALEs). The final forms are substantively identical to the drafts released in June. The final instructions generally follow the draft instructions released in August, but with some important modifications.

Here are highlights of the final instructions:

• Form 1095-B HRA Reporting. The final instructions replace the section on supplemental coverage with a section addressing two common coverage situations, under the heading “Coverage in More Than One Type of Minimum Essential Coverage.” In the first situation, a coverage provider providing more than one type of minimum essential coverage (MEC) to an individual needs to report only one type of coverage. Thus, an employer sponsoring both a self-insured major medical plan and an HRA is required to report coverage under either the major medical plan or the HRA, but not both. In the second situation, a MEC provider does not have to report MEC for which an individual is eligible only because the individual has other MEC for which reporting is required. Thus, an employer sponsoring both a fully insured major medical plan and an HRA for employees enrolled in the major medical plan is not required to report the coverage under the HRA for an individual covered by both arrangements. [Comment: The HRA reporting rules in the draft instructions prompted concern since they would have imposed additional reporting obligations on HRA sponsors with fully insured health plans. This change provides welcome relief and reverts to what many thought the rule should be. Since the insurer is obligated to report enrollment in the major medical coverage on a Form 1095-B, requiring the employer to separately report HRA coverage would have been redundant. Note, however, that if a health plan and HRA are sponsored by different employers (e.g., for employees enrolled both in their own employer’s HRA and their spouse’s employer’s non-HRA self-insured group health plan), each employer will have to separately report. In Notice 2015-68, the IRS has announced its intention to issue proposed regulations on this subject.]
• Form 1095-C. The final instructions include several clarifications and simplifications.
• Reporting COBRA Offers to Terminated Employees. An offer of COBRA coverage made to a former employee upon termination of employment is not reported as an offer of coverage on line 14. Instead, the ALE will enter code 1H (no offer of coverage) on line 14 and code 2A (individual not employed) on line 16 for any month for which a COBRA offer was made to a terminated employee. [Comment: This is a major reversal from a position announced in Q&A guidance earlier this year, which would have required ALEs to report the “offer” of COBRA based on actual COBRA elections. Under the final instructions, COBRA offers for terminated employees are not reported as offers of coverage under any circumstances, even if a former employee elects the coverage. By entering code 2A on line 16, the ALE is protected from potential Code § 4980H penalties for the month.]
• Qualifying Offers. The final instructions add an example involving a full-time employee who receives a qualifying offer for fewer than 12 months in the calendar year. (Receipt of a qualifying offer—an offer of affordable, minimum value coverage to the employee and MEC to family members—disqualifies employees and family members from eligibility for premium tax credits. In some cases, ALEs can provide alternative statements in lieu of Form 1095-C to notify employees of the resulting ineligibility for tax credits.) The example illustrates that an ALE member can use the qualifying offer code (1A) on Form 1095-C so long as the employee received a qualifying offer for all months in which the employee was full-time (and not in a limited non-assessment period), but the ALE member cannot furnish the alternative statement unless the employee received a qualifying offer for all 12 months in the calendar year. The instructions continue to emphasize that Form 1095-C (not the alternative statement) must always be provided to employees who actually enroll in a self-insured health plan sponsored by the ALE. [Comment: A new paragraph added to the instructions for the qualifying offer transition relief for 2015 appears to be misplaced. It states that an ALE relying on this relief can send the “notification described above” to an employee who received a qualifying offer for all 12 months of the calendar year. However, that notification says the employee may be eligible for a premium tax credit, which would not be accurate for an employee who received a qualifying offer for all 12 months.]
• Counting Total Employees. The final instructions state that an ALE can count employees on the 12th day of each month. [Comment: With this addition, ALEs now can choose any of five permissible days within each month to count total employees. The ALE must use the same day for all months in the year.]
• HRA Reporting. The final instructions incorporate HRA reporting rules consistent with the revised reporting rules under Form 1095-B, discussed above.
• ALE Definition. The final instructions note that an employee is not counted for the ALE determination for any month that he or she has coverage under the TRICARE or Veterans’ Administration health care programs. [Comment: This change reflects recent legislation.]

Comment: Careful readers will find other tidbits that may prove useful when completing the forms. For example, clarification is provided regarding truncation of EINs on statements provided to individuals and how to handle missing taxpayer IDs. Reporting entities will also want to read Notice 2015-68 for its further elaboration of reporting issues, including limited penalty relief related to soliciting taxpayer IDs from covered individuals.