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ACA Compliance in 2020 - The new 1095-C Codes


Are you aware of what reporting codes are in your annual ACA reporting? There are new 1095-C codes in ACA Reporting for 2020. Failing to accurately populate your 1095-C forms with the respective codes is one of the fastest ways of putting your organization at risk of receiving IRS penalty assessments. The tax agency is currently issuing penalties for the 2018 tax year and we see this as a signal that the IRS will soon begin issuing penalty letters for non-compliance with the ACA.

Avoid ACA related fines for incorrect reporting by staying up to date and reviewing your embedded ACA codes in your payroll platform. Having an ACA module through your payroll platform doesn’t always cover your ACA reporting requirements, as they auto-populate based on existing information and your payroll provider is not liable for your incorrect reporting. Your payroll provider gathers the reporting on your behalf and the liability ends right there. It’s the employer’s responsibility to review and ensure all the information is accurate prior to signing off and submitting.

Now, we will be covering the new codes for the 2020 tax year as they pertain to the Individual Coverage Health Reimbursement Arrangement, in accordance with President Trump’s Executive Order No.13813. The Individual Coverage Health Reimbursement Arrangement (HRA) according to HR.gov, is “a specific account-based health plan. It allows employers the ability to better control costs by providing defined non-taxed reimbursements to employees for qualified health insurance costs, like monthly premiums for individual market plans purchased through the Marketplace or private insurance companies.” Essentially, the rule allows employers to use individual coverage HRAs to reimburse employees for the cost of health insurance coverage purchased in the individual health insurance marketplace in order to satisfy their ACA Employer Mandate requirements.

This final rule went into effect on August 19, 2019 and became applicable to plans starting in January 2020. Here’s a breakdown of the new codes to be entered on Line 14 of the 1095-C Form as provided in the new IRS draft forms:


1L. Individual coverage health reimbursement arrangement (HRA) offered to an employee with the affordability determined using the employee’s primary residence ZIP Code.

1M. Individual coverage HRA offered to an employee and their dependent(s) with the affordability set using the employee’s primary residence ZIP Code.

1N. Individual coverage HRA offered to an employee, their spouse and any dependent(s) with affordability determined by the employee’s primary residence location ZIP Code.

1O. Individual coverage HRA offered to an employee only using the employee’s primary employment site ZIP Code affordability safe harbor.

1P. Individual coverage HRA offered to an employee and their dependents (not spouse) using the employee’s primary employment site ZIP Code affordability safe harbor.

1Q. Individual coverage HRA offered to an employee, their spouse and dependent(s) and using the employee’s primary employment site ZIP Code affordability safe harbor.

1R. Individual coverage HRA that is NOT affordable offered to an employee; employee and spouse or dependent(s); or employee, spouse, and dependents.

1S. Individual coverage HRA offered to an individual who was not a full-time employee.

Employers who need assistance in understanding the traditional, recurring 1095-C codes should review our guide here.

Contact us at @Clickonhr to learn about the ins and outs of ACA Form, 1095- C, how to handle the population of forms as well as the filing and furnishing requirements.

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