ACA 1095 PITFALL: WRONG PREMIUM AMOUNTS
Even though Line 15 is one of the easier parts of the 1095-C form the opportunity to make mistakes still exists. As a quick refresher, the premium amount on Line 15 pertains to the lowest employee monthly premium amount offered for single only coverage. This rule applies regardless of the actual plan and coverage tier the employee enrolled in. Case in point, if employees were offered 3 plans whose employee share ranged from $200 to $600, Line 15 would show $200 even for employees that enrolled in the $600 plan.
In addition to the possibility of simply entering the premium for the enrolled plan (versus the offered plan) other types of errors could occur including:
1. The full premium amount
2. Off-cycle plan
3. COBRA premium
Incorrect Premium Amount Reasons
Like many parts of 1095-C reporting the instructions for entering the monthly premium amount were perceived as ambiguous which in turn, invariably led to employers/vendors providing the full premium amount (employer and employee) portion instead of just the employee portion. Another example pertains to off-cycle plan years.
While the majority of plans have a January 1st start date some plans have “off-cycle” plans (i.e., start in any month, but January). Since most plans have premium increases in the new year, it’s important the new premium is accurately shown and is properly handled in the Offer of Coverage (Line 14) section. For example, if the premium is below 9.56% of the Federal Poverty Level in the first part of the year, but then exceeds 9.56% in the second part of the year, the Offer of Coverage Code cannot be a 1A (assuming the plan met the other qualifying characteristics). Another example pertains to COBRA premiums.
Since employers generally shift the entire premium to the terminated employee the monthly premium amount will change. To that end, the amount must not only reflect the actual cost, but the cost must be assigned to the correct month as this is driven by whether or not benefits end mid-month or on the last day of the month.
In order to mitigate future risks employers should thoroughly review the Line 15 monthly premium amount. Employers have the opportunity to ensure all monthly premiums are handled correctly and penalties are avoided. As they say, “there’s no time like the present – do it now!”