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What is Tax Form 1095-C?

Tax Form 1095-C, officially titled Employer-Provided Health Insurance Offer and Coverage, is an IRS form used to report information about the health insurance coverage offered to employees by Applicable Large Employers (ALEs). ALEs are generally those with 50 or more full-time employees (including full-time equivalent employees) during the previous calendar year. This form is crucial for both employers and employees for compliance with the Affordable Care Act (ACA). It details the type of health coverage offered, whether the employer offered affordable coverage that provides minimum value, and the period during which the coverage was available. Think of it as a vital piece of the ACA puzzle, ensuring everyone plays by the rules and individuals have access to affordable health coverage.

Understanding the Form’s Purpose

The 1095-C form serves two primary purposes:

Employer Reporting: It allows ALEs to report to the IRS the information required to determine whether they owe an employer shared responsibility payment (often referred to as the employer mandate penalty). This penalty applies if the employer did not offer minimum essential coverage (MEC) to at least 95% of its full-time employees and their dependents, or if the coverage offered wasn’t affordable or didn’t provide minimum value.
Employee Information: It provides employees with the information they need to determine whether they are eligible for the premium tax credit when purchasing health insurance through the Health Insurance Marketplace. This credit helps lower the cost of health insurance for individuals and families with moderate incomes.

Key Sections of Form 1095-C

The 1095-C form is divided into several sections, each providing specific information:

Part I: Employee and Employer Information: This section identifies the employee and the employer providing the coverage. It includes names, addresses, and Employer Identification Numbers (EINs).
Part II: Employer Offer of Coverage: This section is the heart of the form. It details the type of coverage offered to the employee, using specific codes to indicate whether the coverage meets the ACA’s affordability and minimum value standards. It also indicates whether coverage was offered to the employee’s spouse and dependents.
Part III: Employee Enrollment Information: This section is completed only for employees who were actually enrolled in the employer-sponsored health insurance plan. It lists the months the employee was covered. For employers using the qualifying offer method, this section details who was enrolled.

Who Needs to File Form 1095-C?

As mentioned earlier, Applicable Large Employers (ALEs) are required to file Form 1095-C with the IRS. This generally includes employers with 50 or more full-time employees (including full-time equivalent employees) during the previous calendar year. Even if an employee is not enrolled in the employer’s health plan, the employer is still required to provide Form 1095-C to all full-time employees.

Employees are not required to file Form 1095-C with their tax return. However, they should keep the form with their tax records as it contains important information needed to determine eligibility for the premium tax credit.

Navigating the 1095-C Codes

One of the most confusing aspects of the 1095-C form is understanding the codes used in Part II. These codes indicate the type of coverage offered and whether it meets the ACA’s standards. Here are some of the most common codes and their meanings:

1A: Qualifying Offer: This indicates that the employer offered minimum essential coverage providing minimum value to the employee, with the employee contribution for self-only coverage being no more than a certain dollar amount (adjusted annually).
1B: Minimum Essential Coverage (MEC) providing minimum value offered to employee only: This indicates the employee was offered MEC providing minimum value to them only.
1C: MEC providing minimum value offered to employee and at least one dependent: This indicates the employee was offered MEC providing minimum value to them and at least one dependent.
1H: No offer of coverage: This indicates that the employee was not offered health coverage by the employer.
2C: Employee enrolled in coverage: This indicates that the employee was enrolled in the employer’s health plan.
2D: Employee in a waiting period: This indicates that the employee was in a waiting period for coverage.
2E: Employee not employed during the month: This indicates that the employee was not employed by the employer during the month.

It’s crucial for employers to accurately use these codes to avoid potential penalties. Employees should also understand these codes to verify the information provided by their employer.

FAQs About Tax Form 1095-C

1. What happens if I don’t receive Form 1095-C from my employer?

If you are a full-time employee of an ALE and do not receive Form 1095-C, contact your employer. Employers are required to provide this form to all full-time employees. If your employer fails to provide the form, you can contact the IRS for assistance. However, keep in mind that you are not required to file the form with your tax return, so the absence of the form will not prevent you from filing.

2. Do I need Form 1095-C to file my taxes?

No, you are not required to file Form 1095-C with your tax return. However, it is recommended that you keep the form with your tax records as it contains important information that you may need to determine your eligibility for the premium tax credit.

3. What is the deadline for employers to provide Form 1095-C to employees?

Generally, employers are required to furnish Form 1095-C to employees by March 2nd of the year following the calendar year to which the form relates. However, this date is subject to change by the IRS.

4. What is the deadline for employers to file Form 1095-C with the IRS?

The deadline for filing Form 1095-C with the IRS is generally February 28th (if filing on paper) or March 31st (if filing electronically) of the year following the calendar year to which the form relates.

5. What is the difference between Form 1095-A, 1095-B, and 1095-C?

Form 1095-A is provided by the Health Insurance Marketplace and reports information about the health insurance coverage purchased through the Marketplace. Form 1095-B is provided by insurance providers and other coverage providers and reports information about individuals who have minimum essential coverage. Form 1095-C, as discussed, is provided by ALEs and reports information about the health insurance coverage offered to employees.

6. How do I use Form 1095-C to claim the premium tax credit?

Form 1095-C provides information about the health coverage offered by your employer. You can use this information to determine whether you are eligible for the premium tax credit if you purchase coverage through the Health Insurance Marketplace. Specifically, you’ll need to know if your employer offered you affordable coverage that provides minimum value.

7. What does “minimum essential coverage” (MEC) mean?

Minimum Essential Coverage (MEC) is a type of health insurance coverage that meets the individual mandate requirements under the Affordable Care Act (ACA). It generally includes coverage provided by employers, government-sponsored programs like Medicare and Medicaid, and individual health insurance policies purchased through the Health Insurance Marketplace.

8. What does “minimum value” mean in the context of health insurance coverage?

Minimum Value refers to health insurance coverage that pays at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan. It ensures that the coverage provides a significant level of financial protection.

9. What is the “employer shared responsibility payment”?

The Employer Shared Responsibility Payment (ESRP), often referred to as the employer mandate penalty, is a payment that ALEs may be required to make to the IRS if they do not offer affordable minimum essential coverage that provides minimum value to at least 95% of their full-time employees and their dependents, and at least one full-time employee receives a premium tax credit to purchase coverage through the Health Insurance Marketplace.

10. What if the information on my Form 1095-C is incorrect?

If you believe the information on your Form 1095-C is incorrect, contact your employer immediately. They are responsible for correcting and reissuing the form.

11. Are part-time employees entitled to receive Form 1095-C?

Only full-time employees of Applicable Large Employers (ALEs) are entitled to receive Form 1095-C. A full-time employee is generally defined as someone who works an average of at least 30 hours per week, or 130 hours per month.

12. Where can I find more information about Form 1095-C and the Affordable Care Act?

You can find more information about Form 1095-C and the Affordable Care Act (ACA) on the IRS website (www.irs.gov) and the HealthCare.gov website (www.healthcare.gov). Consult with a qualified tax professional or benefits advisor for personalized guidance.