Q: I have been reviewing the employer reporting form and have a couple of questions about Form 1095-C line 14.
- Does Code 1A mean that $1,108.65 is the most that an employee can contribute to the cost of his/her premium payment for the year to comply with the regulations for a minimum value plan?
- It currently looks like each of our employees pays $1,188 of his/her premium which would be $79 over the limit to qualify for the minimum value plan right?
A: Let me begin by saying how glad I am that you are reviewing the form. You're certainly ahead of many schools I talk with.
As you probably already know, Form 1095-C is the employer reporting form that goes to Full-Time Employees (FTE) and the IRS. This form tells the government whether you should be assessed a penalty for not offering health insurance. Line 14, the part you specifically questioned, pertains to the Employee's Offer and Coverage. To understand the codes, there are certain definitions you need to remember.
- Minimal Essential Coverage: Any “eligible employer-sponsored plan” is a group health plan or group health insurance coverage provided by an employer to an employee that is offered in a state’s small or large group market.
- Minimal Value: An eligible employer sponsored plan covers at least 60% of the allowed cost under that plan.
- Employer Safe Harbors on Affordable Coverage: The IRS has given employers three "safe harbors" so that—if you comply with the regulations—you will not face the employer penalty in the event that an employee goes to the marketplace and gets a tax credit because the insurance offered by your school is not affordable based on modified family income. The safe harbors are:
(A) Federal Poverty Line Safe Harbor: This is the harbor to which 1A refers. The employee's share of the cost of employee-only health insurance cannot be more than 9.5% of the Federal Poverty Line, which in 2015 is $1,108.65 ($92.38 a month).
(B) W-2 Safe Harbor: The employee's share of employee-only health insurance cannot be more than 9.5% of the income reported on the employee's W-2 form.
(C) Rate of Pay Safe Harbor: For hourly employees, the employee's share of the cost of employee-only health insurance cannot be more than 9.5% of the hourly rate of pay X 130 hours per month. For salaried employees, the cost of employee-only health insurance cannot be more than 9.5% of monthly pay.
For the first part of your question, Code 1A states that the school made a “qualifying offer.” A qualifying offer is an offer to the employee that is “minimum essential coverage,” is “minimum value,” and the cost of the coverage offered for self-only coverage was equal to or less than the “Federal Poverty Line Safe Harbor.” (It can also show that the coverage was offered to the employee's spouse and dependent children). If you qualify for this offer, you do not have to fill in the cost of coverage by month.
Line 14 has additional codes, depending on who was offered coverage—employee, employee/spouse, employee/dependent children, or family—and whether said coverage was minimum value. It also has provisions if no coverage was offered, or you had relief from offering coverage due to your school's size or a non-calendar plan year.
For the second part of the question, you are correct about the money your employees are paying being over the Federal Poverty Line Safe Harbor. However, your employees' current premium contributions qualify for the “W-2 Safe Harbor” or the “Rate of Pay Safe Harbor,” both of which could render your insurance premium as “affordable.” As an employer, you cannot pick and choose your safe harbor based on individual employees, but you can have different safe harbors for employees of different classifications (e.g., hourly and salary).
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