The IRS issued draft Affordable Care Act (ACA) information reporting forms and instructions for 2021. The main ACA reporting forms are Forms 1094-B & 1095-B, which minimum essential coverage providers must file to report coverage information to the IRS, and Forms 1094-C and 1095-C, which applicable large employers (ALEs) must file to provide information to the IRS to administer the employer shared responsibility penalties and assess eligibility for premium tax credits. There were no notable changes to the draft forms for the 2020 tax year, but draft Form 1095-C and its instructions reflect two new codes (1T and 1U).
The 1T code is used when the applicable individual and spouse receive a Health Reimbursement Arrangement (HRA) offer of coverage from the employer, where the affordability was determined using the employee’s primary residence zip code. This code excludes dependents as recipients of the HRA coverage that was offered by the employer.
The 1U code uses different criteria for determining affordability. The 1U code should be used when an applicable individual and spouse receive an HRA offer of coverage from the employer where the affordability was determined using the employee’s primary employment site zip code affordability safe harbor. This code also excludes the individual’s dependents as recipients of HRA coverage.
The 1T and 1U codes refer to HRA coverage. HRAs are IRS-approved, employer-funded health benefits used to reimburse employees for monthly out-of-pocket medical expenses and health insurance premiums.
Form 1095-C instructions also include new Line 14 codes: 1V-1Z, all of which are reserved for future use.
Additionally, the Form 1095-B and 1095-C instructions no longer mention an automatic extension for an employer to furnish statements to individuals, but instead simply note the normal January 31, 2022, due date and explain how to request a discretionary 30-day extension. Prior references to penalty relief for reporting incomplete or incorrect information no longer appear in the draft forms.
Keep in mind that the IRS has only issued draft instructions, and it may include additional changes in the final forms and instructions. Employers should ensure they review the IRS’ draft and final instructions to comply with all applicable requirements and timelines to avoid any costly penalties.
Important deadlines to keep in mind include:
January 31, 2022 – Individual statements for 2021 must be furnished (this can be a copy of Form 1095-C)
February 28, 2022 – Paper IRS returns for 2021 must be filed
March 31, 2022 – Electronic IRS returns for 2021 must be filed (Note: electronic returns are required for employers filing 250 or more returns)
