Under the Patient Protection and Affordable Care Act (ACA), individuals are required to have health insurance while applicable large employers (ALEs) are required to offer health benefits to their full-time employees.
In order for the Internal Revenue Service (IRS) to verify that (1) individuals have the required minimum essential coverage, (2) individuals who request premium tax credits are entitled to them, and (3) ALEs are meeting their shared responsibility (play or pay) obligations, employers with 50 or more full-time or full-time equivalent employees and insurers will be required to report on the health coverage they offer. Similarly, insurers and employers with less than 50 full time employees but that have a self-funded plan also have reporting obligations. All of this reporting is done on IRS Forms 1094-B, 1095-B, 1094-C and 1095-C.
Form 1094-C is used in combination with Form 1095-C to determine employer shared responsibility penalties. It is often referred to as the "transmittal form" or "cover sheet." IRS Form 1095-C will primarily be used to meet the Section 6056 reporting requirement, which relates to the employer shared responsibility/play or pay requirement. Information from Form 1095-C will also be used in determining whether an individual is eligible for a premium tax credit.
Form 1094-C contains information about the ALE, and is how an employer identifies as being part of a controlled group. It also has a section labeled "Certifications of Eligibility" and instructs employers to "select all that apply" with four boxes that can be checked. The section is often referred to as the "Line 22" question or boxes. Many employers find this section confusing and are unsure what, if any, boxes they should select. The boxes are labeled:
- Qualifying Offer Method
- Qualifying Offer Method Transition Relief
- Section 4980H Transition Relief
- 98% Offer Method
Different real world situations will lead an employer to select any combination of boxes on Line 22, including leaving all four boxes blank. Practically all employers except a mid-size employer that did not qualify for transition relief should select Box C, and corresponding with that, most employers will enter letter either "A" or "B" in Part III Column (e) of the 1094-C. Very few employers will be able to select Box D unless they offer minimum value, minimum essential, affordable coverage to all employees. Employers who do not use the federal poverty level safe harbor for affordability will never select Box A or Box B, and corresponding with that, will never use codes 1A or 1I on Line 14 of a 1095-C form.To fully understand each box, including plain language explanations of the form instructions, request UBA’s ACA Advisor, “IRS Reporting Tip: Form 1094-C, Line 22”.