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2016 IRS Forms 1094-C and 1095-C: What to Do Now

The IRS has just released the new 1094-C and 1095-C forms for 2016 for employer reporting of health coverage both to employees and to the IRS. There are many notable differences from the first year's forms in 2015 that employers will need to prepare for now.

First and foremost, employers should note that all of the extended deadlines in 2016 for which to file the 2015 forms are gone. Employers will have significantly less time to prepare, distribute, and file the 1094-C and 1095-Cs for 2016, as shown in the table below.

Information Reporting Forms

2015 Deadlines
(Forms Filed in 2016)

2016 Deadlines
(Forms Filed in 2017)

Forms 1095-B and 1095-C due to employees

March 31, 2016

January 31, 2017

Forms 1094-B, 1095-B, 1094-C and 1095-C due to IRS if filing in paper format

May 31, 2016

February 28, 2017

Forms 1094-B, 1095-B, 1094-C and 1095-C due to IRS if filing electronically*

June 30, 2016

March 31, 2017

*An employer filing at least 250 information returns for the year must file those returns with the IRS electronically.  Employers filing fewer than 250 information returns have the option to either file electronically or in paper format.

The instructions did provide some clarifying language that is useful. When completing Form 1094-C Part III column (b) the final instructions make it clear that an employee should be counted as a full-time employee for the purpose of the column if they satisfy the definition of a full-time employee under either the monthly measurement method or the look-back measurement method.

Another helpful clarification in the new instructions is that Part III of the 1095-C form need only be completed by employers whose plan(s) are self-funded, and not for those whose plans are fully insured.

Perhaps one of the most difficult and confusing aspects of the 1095-C form for 2015 was the coding required on lines 14 and 16. The new instructions made a number of clarifications here.  First, code 1G on line 14 can only be used for all 12 months of the year, or not at all. Second, none of the safe harbor codes on line 16 (2F, 2G, or 2H) can be used if the employer did not offer Minimum Essential Coverage (MEC) meeting Minimum Value (MV) standards to at least 95 percent of its full-time employees, defined as those averaging at least 30 hours per week. Next, the code 1I on line 14 and 2I on line 16 may no longer be used by an employer. Last, two new codes are introduced for an employer that offers MEC meeting MV to an employee and conditionally to their spouse.  A conditional offer of coverage to a spouse is an offer of coverage that is subject to one or more reasonable, objective conditions, such as the employee’s spouse only being eligible for coverage if the spouse is not eligible for coverage through the spouse’s employer. If coverage is offered to an employee and conditionally offered just to the spouse, but not to the employee's dependents, then new code 1J is entered on line 14.  Code 1J is comparable to code 1D, and is likely to generate an IRS penalty under IRC Section 4980H since coverage is not offered to dependents as is required under the definition of a qualifying offer of coverage.  If coverage is offered to the employee and their dependents, and conditionally offered to the spouse, new code 1K (similar to code 1E) is entered on line 14. Note that if either of these new codes is used on line 14, then line 15 must also be completed.

The last change from 2015 is perhaps the biggest. An employer will no longer be able to use the good faith efforts standard to protect itself from filing information returns or payee statements with inaccurate or incorrect information. In 2015, if the Forms 1094-C and 1095-C were filed on time, the IRS did not assess a penalty for filing an information return or payee statement with inaccurate or incorrect information so long as a good faith effort was made by the employer. This protection is no longer available for the 2016 returns. An employer can be penalized $260 per return for failing to file a correct information return with the IRS. Similarly, an employer can be penalized $260 per statement for failing to provide a correct form to an employee.

It's not too early to begin preparing to collect the necessary information in order to properly prepare the 1095-C and 1094-C forms now.

Posted on October 05, 2016 by Gary B. Kushner, SPHR, CBP, President and CEO

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