What Is the Meaning of a 1095-C Form? Explanation Inside

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Okay, here’s an article explaining the 1095-C form:

What Is the Meaning of a 1095-C Form? Explanation Inside

If you’ve been employed by a large company in the United States, you’ve likely encountered a 1095-C form. It might seem intimidating, filled with boxes and codes, but understanding it is crucial for verifying your health insurance coverage and avoiding potential tax penalties. This article breaks down the 1095-C, explaining its purpose, who receives it, and what the information on it actually means.

What is the Purpose of Form 1095-C?

The 1095-C form, officially titled “Employer-Provided Health Insurance Offer and Coverage,” is a tax form related to the Affordable Care Act (ACA). Its primary purpose is to report information about the health insurance coverage offered to you by your employer, if your employer is considered an “Applicable Large Employer” (ALE).

Who is an Applicable Large Employer (ALE)?

An ALE is generally an employer with an average of at least 50 full-time employees (including full-time equivalent employees) during the previous calendar year. The ACA’s “employer mandate” requires ALEs to offer affordable, minimum essential health coverage to their full-time employees (and their dependents) or potentially face penalties. The 1095-C is how ALEs report this information to the IRS and to their employees.

Who Receives a 1095-C?

You will receive a 1095-C if:

  • You were a full-time employee of an ALE for any month of the calendar year. “Full-time” is generally defined as working an average of 30 hours per week or 130 hours per month.
  • You were enrolled in your employer’s self-insured health plan, even if you weren’t a full-time employee. With self-insured plans, the employer takes on the financial risk of healthcare costs, rather than purchasing insurance from an insurance company.

Crucially, receiving a 1095-C does not mean you owe any additional taxes. It’s an informational form, similar to a W-2 for wages. You do not need to attach it to your tax return. However, you should keep it with your tax records.

Breaking Down the 1095-C: A Section-by-Section Explanation

The 1095-C is divided into three parts:

Part I: Employee and Employer Information

This section is straightforward and contains basic identifying information:

  • Employee Information: Your name, Social Security number (SSN), and address.
  • Employer Information: The name, address, Employer Identification Number (EIN), and contact phone number of your employer (the ALE).

Part II: Employee Offer of Coverage

This is the core of the 1095-C and details the health insurance offered to you by your employer for each month of the year. It uses a series of codes to convey information. Here’s a breakdown of the key boxes:

  • Line 14: Offer of Coverage: This line uses a code to indicate the type of coverage offered to you for each month. Here are some of the most common codes:

    • 1A: Qualifying Offer: Minimum Essential Coverage (MEC) providing minimum value offered to the employee, with the employee contribution for self-only coverage equal to or below a certain percentage (adjusted annually) of the federal poverty line, and at least MEC offered to spouse and dependents. This is the “best” code from an employer’s perspective.
    • 1B: MEC providing minimum value offered to employee only.
    • 1C: MEC providing minimum value offered to employee and at least MEC offered to dependents (not spouse).
    • 1D: MEC providing minimum value offered to employee and at least MEC offered to spouse (not dependents).
    • 1E: MEC providing minimum value offered to employee and at least MEC offered to dependents and spouse.
    • 1H: No offer of coverage.
    • Other Codes: There are other codes for specific situations, such as conditional offers or coverage through a multiemployer plan. Consult the IRS instructions for Form 1095-C for a complete list.

  • Line 15: Employee Required Contribution: This line shows the employee’s share of the monthly premium for the lowest-cost, self-only coverage that provides minimum value. This is not necessarily the premium you actually paid if you chose a different plan or enrolled family members. It’s used to determine if the offered coverage was “affordable” under the ACA. If this line is blank, it typically means one of two things. There was no offer of minimum value coverage, or there is no employee share of the premium.

  • Line 16: Section 4980H Safe Harbor Codes and Other Relief: This line uses codes to indicate if the employer is eligible for certain “safe harbors” that protect them from potential penalties under the ACA’s employer mandate, even if the coverage might not otherwise meet all the requirements. Some common codes include:

    • 2A: Employee not employed during the month.
    • 2B: Employee not a full-time employee.
    • 2C: Employee enrolled in coverage offered.
    • 2D: Employee in a Limited Non-Assessment Period (e.g., a waiting period).
    • 2F: Section 4980H affordability Form W-2 safe harbor.
    • 2G: Section 4980H affordability federal poverty line safe harbor.
    • 2H: Section 4980H affordability rate of pay safe harbor.
    • Other Codes: Refer to the IRS instructions for a complete list.

Part III: Covered Individuals (Only for Self-Insured Plans)

This part is only completed if your employer offers a self-insured health plan. If your employer purchases insurance from an insurance company, Part III will be blank. This section lists the names, SSNs (or dates of birth if SSNs are unavailable), and coverage information for all individuals covered under the plan, including you and any dependents. It indicates which months each individual was covered.

What to Do with Your 1095-C

  1. Review for Accuracy: Check that your personal information and the employer information are correct.
  2. Understand Your Coverage: Use the codes in Part II to understand the type of coverage offered to you each month and whether it was considered “affordable.”
  3. Keep for Your Records: Store the 1095-C with your other tax documents. You may need it to answer questions about your health insurance coverage if you’re claiming the Premium Tax Credit or if the IRS has questions about your compliance with the individual mandate (although the individual mandate penalty is currently zero, this could change in the future).
  4. Do Not Attach: You don’t include it in your return filing.

Important Considerations:

  • Multiple 1095-Cs: If you worked for multiple ALEs during the year, you will receive a 1095-C from each one.
  • 1095-A and 1095-B: Don’t confuse the 1095-C with the 1095-A (Health Insurance Marketplace Statement) or the 1095-B (Health Coverage). The 1095-A is for coverage purchased through the Marketplace, and the 1095-B is for coverage from other sources, such as smaller employers, government programs (like Medicare or Medicaid), or directly from an insurance company.
  • Contact Your Employer: If you have questions about the information on your 1095-C, or if you believe there is an error, contact your employer’s HR or benefits department.
  • Consult the IRS: The IRS website (irs.gov) provides detailed instructions and FAQs about Form 1095-C.
  • Seek Professional Advice: If you have complex tax situations or are unsure how the 1095-C affects your taxes, consult a qualified tax professional.

By understanding the 1095-C, you can gain a clearer picture of your health insurance coverage and ensure you’re meeting the requirements of the Affordable Care Act.

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