ACA 1095 BEST PRACTICES:
AUTOMATED LINE 14 OFFER OF COVERAGE CODE
Definition – A technology-based approach for automatically determining and assigning the appropriate 1095-C, Part 2 Offer of Coverage Code for each of the 12 months for each respective recipient and covered individual.
Rationale – The penalty for putting the wrong Offer of Coverage Code in Line 14 is $250 per incorrect form. In addition, using an inappropriate code can also be problematic for the affected employee particularly if they are wrongly accused and it impacts their subsidy status. Examples of Line 14 of Offer of Coverage Codes and their impact follow.
1. 1A Qualifying Offer – A 1A Qualifying Offer pertains to offers that have the following characteristics: minimum essential coverage, minimum value, offer extended to all and the lowest monthly premium for single only coverage was below $93.18 (for the 2015 calendar year). In the event this code is not used appropriately this could become a trigger for future IRS audits. How is this possible? If many employees from the same employer apply for subsidies which in turn trigger an inquiry and it is learned that the plan never had qualifying offers, it is likely a penalty of $250 times each recipient with an erroneous 1095-c will translate into a penalty.
2. 1H No Offer of Coverage – A 1H No Offer of Coverage pertains to employees that did not receive any offer in the respective month(s). If a recipient that mistakenly receives a 1H when he in fact was offered insurance (and enrolled in the plan according to the carrier-generated 1094-B) this will likely trigger an IRS inquiry.
- Review source data
- Develop metric estimates (e.g. Qualifying Offers, No Offers)
- Run test data
- Compare actual results to estimates
- Refine software and re-test
Since 2016 is no longer a “best efforts” year, employers should embrace best practices or simply accept the dire likelihood of material penalties. In order to mitigate future risks employers should thoroughly review and improve their supporting processes and technologies. Employers have the opportunity to fortify their environments and avoid penalties. As they say, “there’s no time like the present – do it now!”