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The IRS has recently released the final versions of the 2016 1094-B, 1095-B, 1094-C and 1095-C forms and instructions.

The final forms and instructions are similar to those for 2015, with a few tweaks.

Form 1094-C and 1095-C Reports

On the 1094-C, Line 22 (B) has been changed from “Qualifying Offer Transitional Relief” to “Reserved.”

On the 1095-C, “Plan Start Month” will continue to be optional on the 2016 reporting.

Most importantly, two new Series 1 Codes to be used on Line 14 have been added:

  • 1J: Minimum essential coverage providing minimum value offered to the employee, minimum essential coverage conditionally offered to spouse; and minimum essential coverage NOT offered to dependent(s).
  • 1K: Minimum essential coverage providing minimum value offered to the employee; minimum essential coverage conditionally offered to spouse; and minimum essential coverage offered to dependent(s).

Form 1094-C and 1095-C Instructions

The IRS has released the final instructions for Form 1094-C and Form 1095-C. For the most part, they remain consistent with the 2015 instructions, with a few key clarifications and additions.

Aggregated ALE Group

The final instructions reiterate that all ALE members that are part of an aggregated ALE group, generally meaning members of a controlled group, must file its own Form 1094-C and Form 1095-Cs. However, there will be no authoritative transmittal filed for an aggregated ALE group. An authoritative transmittal is filed, however, if an employer is filing only a single Form 1094-C or if an employer is filing multiple Form 1094-Cs as they relate to multiple operating divisions under that employer.

The final instructions also provide a helpful example of how to code an individual who works for multiple members of an Aggregated ALE Group. The employee should only be identified as a full-time employee for the employer they worked the most hours for in a given month. For the employer in which the employee worked the most hours, they would claim that employee for the month and code appropriately based on the offer of coverage. For the employer for which the employee worked less hours in a given month, the employer would code them as 1H (no offer of coverage), leave line 15 blank and enter code 2A (not an employee) on line 16 for that month.

Multiemployer Plan Relief Extended

The final instructions for Form 1095-C extend the existing multiemployer plan relief for 2016. This means that employers qualifying for the relief, for instance ALEs with union employees, who rely on the offer of coverage from the union to fulfill their requirement under the Employer Mandate, won't need to obtain eligibility and offer of coverage information for those employees. The instructions indicate this may change for 2017 and beyond.

Conditional Offers of Spousal Coverage

The final instructions detail the two new codes, codes 1J and 1K, for Form 1095-C, Part II, line 14 that will be used to indicate a conditional offer of coverage for spouses. An example of a conditional offer would be only offering coverage to the spouse if they're not eligible for coverage under another group health plan. 1J is used if minimum essential coverage (MEC) providing minimum value (MV) is offered to the employee, MEC is conditionally offered to spouse and MEC isn't offered to dependents. IK is used if MEC providing MV is offered to the employee, at least MEC is offered to dependents and at least MEC is conditionally offered to spouse.

The final instructions note that a conditional offer would generally impact a spouse’s eligibility for a premium tax credit only if all conditions of the offer are satisfied, meaning that the spouse was actually offered the coverage and eligible for it. To help individuals who have received a conditional offer determine their eligibility for a premium tax credit, ALEs should be prepared to provide, upon request, a list of any and all conditions applicable to the spousal offer of coverage.

COBRA and Retiree Coverage

The final instructions provide clarification on how to report an employee in the month they terminate with an ALE member and the ALE member is treated as having made an offer of coverage to the employee’s dependents for the entire plan year if the ALE member provided an employee an opportunity to enroll dependents in coverage at least once during the plan year, even if they didn't enroll in coverage, thus resulting in no offer of COBRA to those dependents.

If an employee is terminated in the middle of the month, and their coverage as an active employee terminates as of the date of termination from employment, code 2A would be used on line 16 as opposed to 2C, even if the individual elected COBRA.

Employer Required Contribution Definition

The final instructions point out that full-time employee determination for purposes of filing out Form 1095-C must be based on the definition under Code §4980H, meaning 130 hours of service a month (30 hours a week).

The instructions explicitly state that the only two methods that may be used to determine who is a full-time employee is the lookback method and monthly method as outlined in the regulations. They also make a point to reiterate that an employee is a full-time employee for each month of a stability period if they qualified for coverage during the preceding measurement period.

Additionally, when indicating the cost of coverage on line 15, the instructions make it clear that it's important to take into account certain employer contributions that affect the overall affordability of the plan, such as HRA contributions and opt-out payments.

Expired 2015 Transitional Relief

As anticipated, most of the transitional relief previously provided only applied to the 2015 calendar year. The draft instructions only include the transitional relief that continued to apply from 2015 into 2016 for qualifying non-calendar year plans.

Next Steps

If employers currently offer a conditional offer of coverage to spouses, they should verify they have the ability to track those offers and report that information accordingly. If a conditional offer was made, employers will need to go back to their reporting vendor to make sure the proper coding will be utilized on the 2016 forms. The final instructions stress the importance of making sure employers are properly identifying their full-time employees using either the lookback or monthly measurement method appropriately to ensure accurate reporting for 2016. They should also ensure the method they're using is documented.

Employers should double check with their vendor to make sure they're able to support the method that has been chosen to identify full-time employees. Employers should also make sure the expectations are clear for both the employer and vendor in regards to completing the reporting requirements.

If you currently don't have a vendor to assist you in your ACA Reporting, or have questions regarding the vendor you have in place, please contact your Assurance representative.

Information contained herein is not intended to constitute tax or legal advice and should not be used for purposes of evading or avoiding otherwise applicable regulatory responsibilities as issued by the federal or state government(s) and/or taxes owed under the Internal Revenue Code. You are encouraged to seek advice from your legal or tax advisor based on your circumstances.