Don’t forget about COBRA participants when fulfilling ACA reporting requirements. When completing Form 1095-C, employers must include employees who were offered COBRA during the year, and the right codes must be used.
ACA reporting requirements are still in place.
Let’s start by clarifying a possible source of confusion: ACA requirements for employers are still in place.
The federal penalty for the individual mandate, which requires individuals to maintain health insurance coverage, has been reduced to $0 as of 2019. This effectively means that the individual mandate has been repealed.
However, the employer mandate is still in effect. This means that Applicable Large Employers (ALE) must offer affordable health insurance coverage that meets the requirements for minimum essential coverage or else pay a fee. It also means that employers much continue to satisfy ACA reporting requirements.
Guidelines from the IRS
To help employer complete forms 1094-C and 1095-C correctly, the IRS has provided answers to common questions. These answers include instructions for reporting offers of COBRA continuation coverage.
The reporting requirements differ depending on whether COBRA was offered after termination of employment or after a reduction in hours.
- After a reduction in hours, an offer of COBRA to an active employee should be reported as an offer of coverage in Part II of Form 1095-C. The code used in line 14 will depend on the situation but should reflect only the individuals who received an offer of COBRA. To explain this, the IRS gives an example of an employee who is offered family coverage but selects self-only coverage. When this employee’s hours are reduced, COBRA is offered only to the employee. According to the IRS, “In that case, the ALE Member should enter code 1B, Minimum essential coverage providing minimum value offered to employee only, on line 14 for each month for which the COBRA continuation coverage offer applies.”
- After termination of employment, an offer of COBRA continuation coverage made to a former employee should not be reported as an offer of coverage in Part II of Form 1095-C. However, the employer may be otherwise required to complete a Form 1095-C for the employee based on the employee’s previous employment during the year. In this case, the employer should use code 1H (No Offer of Coverage) on line 14 and code 2A (Employee Not Employed during the Month) on line 16 for any month in which COBRA was offered.
Additionally, employers that self-insure will typically have to report former employees and family members who enroll in COBRA in Part III of Form 1095-C, and Form 1095-B may be used to report individuals who enrolled in COBRA but were not employed during the year.
For more details and examples, go to the IRS page on reporting offers of COBRA continuation coverage.