New IRS Codes for the 2020 Forms 1095-B and 1095-C
The ACA is always changing and evolving, this can make it tricky for applicable large employers (ALEs) and other mandated filers to keep up. Especially with the new ACA codes that will come into play for employers that are offering an ICHRA to their employees.
Here is a guide that helps you understand the new ACA codes that came into effect for the 2020 tax year.
Let’s start out with a little background information on the ICHRA by briefly describing it.
What is an ICHRA?
Effective from January 1, 2020, the Individual Coverage Health Reimbursement Arrangement (ICHRA) is an alternative option for employers of any size to reimburse healthcare expenses to their employees. With an ICHRA, employers can reimburse employees with tax-free money for health insurance premiums and qualified medical expenses with no minimum or maximum reimbursement limits.
Impact of ICHRA on Form 1095-B
Mandated filers who are offering an ICHRA, will also need to provide the plan information in their ACA reporting on Form 1095-B.
The new code G (Individual coverage health reimbursement arrangement (HRA))
must be entered on line 8 of the Form 1095-B to indicate the ICHRA.
This indicates that the ICHRA is the origin of the individual’s health coverage.
Impact of ICHRA on Form 1095-C
As you may know, on Line 14 of the Form 1095-C, you must use the ACA code series 1 to indicate the offer of coverage for each month of the year.
Now that the ICHRA is in play, there are some new codes that are designed to describe the coverage status on a monthly basis. Here are the new codes you should familiarize yourself with if you are offering your employees an ICHRA.
- 1L- The ICHRA was offered to the employee and the affordability was determined using the ZIP code of their primary location.
- 1M- The ICHRA was offered to the employee and dependents, but not the spouse. The affordability was determined by using the ZIP code of the employee’s primary residence.
- 1N- The ICHRA was offered to the employee, dependents, and spouse. The affordability was determined using the ZIP code of the employee’s primary residence.
- 1O- The ICHRA was offered to the employee using the employee’s primary employment site ZIP code affordability safe harbor.
- 1P- The ICHRA was offered to the employee and dependents, but not the spouse. The affordability is determined using the employee’s primary employment site ZIP code affordability safe harbor.
- 1Q-The ICHRA was offered to the employee, spouse, and dependent(s) using the employee’s primary employment site ZIP code affordability safe harbor.
- 1R-The ICHRA is offered to the employee; employee and spouse, or dependent(s); or employee, spouse and dependent and is NOT affordable.
- 1S- The ICHRA was offered to an individual who was not a full-time employee.
Please note that the codes 1T-1Z are reserved for future use, so they will remain a mystery for the time being.
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