How to Complete the 1095-C
Which sections of the 1095-C you must complete depends on whether your business is self-insured or fully insured.
If you’re a fully insured employer, you’ll complete only Parts I and II of the 1095-C (and your insurance carrier will submit the information for Part III separately). If you are self-insured, you must complete Parts I, II and III.
Every employee of an ALE who is eligible for insurance should receive a 1095-C — including those who declined coverage, and those who have left the company but were eligible for coverage during the tax year being reported.
Gathering the Data
Before you can sit down to complete the ACA forms and start the filing process, you must gather certain employee data, including:
- Employees’ names, Social Security numbers and addresses (including employees who left during the previous year)
- Information about health coverage offered
- Employee cost for the lowest-cost monthly premium (typically for self-only coverage)
- The months that each employee was enrolled in coverage
- If self-insured, information about the covered individuals, including Social Security numbers and months of coverage
1095-C Filing Guidance
This information correlates with the parts of the 1095-C as follows:
Part I is where you enter identifying information for the employee (such as name, address and Social Security number) and identifying information for the employer (company name, Employer Identification Number and address).
Part II concerns the offer of coverage. In these three lines, you’ll enter information about the health coverage offered by month, the lowest-cost premium for self-only coverage and the months you met an affordability safe harbor provision.
Part III (required only if your business is self-insured) collects data about the health insurance offered to employees and other covered individuals (spouses, dependents, retirees and COBRA enrollees). You’ll need Social Security numbers or, if these numbers aren’t available, date of birth for each covered individual.
Pointers for Line 14 on the 1095-C
Line 14 (“Offer of Coverage”) captures the type of coverage offered to an employee (and the employee’s spouse and dependents).
You complete this line by choosing one of 10 codes (1A-1H, 1J). These codes generally fall under three categories, with MEC meaning “minimum essential coverage” and MV meaning “minimum valuerd:
Qualified offers of coverage
1C — MEC MV for employee and dependents, but not spouse
1E — MEC MV for employee, spouse, and dependents (family coverage)
1K — MEC MV for employee and dependents; conditional for spouse
1G — Offer to part-time employee or non-employee (like retirees and COBRA participants)
Non-qualified offers of coverage
1B — MEC MV for employee only
1D — MEC MV for employee and spouse, but not dependents
1J — MEC MV for employee, conditional for spouse; no dependent coverage
1F — MEC doesn’t offer MV
1H — No offer of coverage
1A — Qualified offer under the federal poverty line (FPL) safe harbor for affordability
Quick Tip: If one code applies for the entire 12 months, you only need to enter it once in the “All 12 Months” column.
Understanding the Terms
Minimum Essential Coverage: Under the ACA, an employer can be fined by the IRS if it does not offer minimum essential coverage (MEC) to at least 95% of full-time employees and their dependents, and as a result, at least one full-time employee receives a premium tax credit through the health insurance marketplace.
The types of insurance that generally meet the standard of minimum essential coverage include:
- Any employer-sponsored group health plan, whether insured or self-insured &mash; including retiree plans and COBRA
- Coverage under certain government programs, such as Medicare, Medicaid, the Children’s Health Insurance Program (or CHIP) and TRICARE
- Coverage in the individual health insurance marketplace or exchange
- Other coverage recognized by the Department of Health and Human Services, including self-funded student health coverage and coverage under Medicare Advantage plans
- Not included are fixed indemnity coverage, life insurance, and dental or vision coverage
Minimum Value: Most broad-based medical plans meet the legal parameters for minimum value, where the plan pays for at least 60% of covered benefits.
Affordability: To meet the affordability test under the ACA, the premium for the lowest-cost (typically employee-only) coverage must cost no more than 9.69% of an employee’s gross household income for tax year 2017. (This percentage can change annually.) Because employers typically don’t track an employee’s household income, the IRS offers three alternate methods for doing this calculation, known as “safe harbor” tests (defined under Line 16, below).
Note: Even if you do offer minimum essential coverage, you can be fined by the IRS for not offering a plan that meets the minimum value and/or affordability requirements, and as a result, at least one full-time employee receiving a premium tax credit.
Pointers for Line 15 on the 1095-C
On Line 15 (“Employee Share of Lowest Cost Monthly Premium”) you will report the monthly employee contribution for the lowest-cost health insurance option for self-only coverage. This allows the IRS to determine whether affordable coverage was made available to the employee.
Fill out this section ONLY if you entered code 1B, 1C, 1D or 1E on line 14 — either in the “All 12 Months” box or in any of the monthly boxes. Include cents with this figure and don’t round numbers.
Pointers for Line 16 on the 1095-C
Line 16 (“Applicable Section 4980H Safe Harbor”) essentially explains to the IRS the reason you were in compliance with the ACA and should not be penalized for not offering coverage during a given month.
For most employees, the code you’ll use is 2C — employee enrolled in coverage offered.
Otherwise, the reasons for no coverage are:
2A — Employee not employed during month
2B — Employee isn’t a full-time employee
2D — Limited non-assessment period (generally, an employer is not obligated to provide coverage for a new full-time employee for up to three full months)
The affordability safe harbors fall under codes:
2F — W-2 safe harbor
2G — Federal poverty line safe harbor
2H — Rate of pay safe harbor
Note — An affordability safe harbor code should not be entered for any month that the employer did not offer minimum essential coverage.
The final code, 2E (multi-employer interim rule relief), is typically used in cases where an employer offers qualifying coverage through a multi-employer plan related to a collective bargaining agreement.
Safe Harbor Tests
To be considered affordable under the ACA, a health care plan must offer at least one option that does not cost employees more than 9.56% of their annual household income. (This percentage applies to the 2018 tax year only; it is scheduled to increase to 9.86% for 2019.)
This calculation is made on the employee-only plan (no spousal or dependent coverage) as long as it provides the minimum mandated coverage under the law. More expensive plans that provide added benefits or include coverage for spouses and dependents do not affect this calculation, even if an employee chooses a plan that exceeds the 9.69% threshold.
Because employers don’t necessarily know their employees’ household incomes, the law allows employers to use one of three other “safe harbor” methods to make this calculation:
- W-2 Wages – If the annual premium an employee would pay for the minimum ACA-compliant plan is not more than 9.56% of the wages reported in Box 1, the plan is considered affordable.
- Rate of Pay (for hourly employees) - Multiply the employee’s lowest pay rate during the month by 130 hours. If the monthly premium for the minimum compliant plan is not more than 9.56% of this amount, coverage is considered affordable.
- Federal Poverty Level (FPL) - Divide the FPL for a household of one by 12. If the employees’ health care premium is not more than 9.56% of this amount, coverage is considered affordable. For 2018, the FPL is $12,060. Therefore, as long as the minimum compliant plan does not cost employees more than $1,153 annually (or $96.08 monthly), coverage is considered affordable.
Part III for Self-Insured Employers
Part III applies only if you provide self-funded coverage. This is where you enter information about covered individuals, including employees, dependents and spouses, as well as retirees and COBRA recipients.
You’ll need Social Security numbers or, if not available, date of birth. Again, this information isn’t completed by insured employers because it’s reported separately by the health insurance providers, using form 1095-B.