ACA Reporting Case Scenarios: How Employee Termination Impacts 1095-C Reporting

Published by Matt Ingold on September 15, 2015

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If you have started down the worm-hole of completing your annual 1095-C statements, you’ve probably hit some confusion upon reaching Part II. With 9 coded options to plugin for each month of line 14 (1A-1I) and eight coded options for line 16 (2A-2H), things can start to get tricky.

The standard majority of cases are not the problems. Rather, it’s the odd-ball scenarios that generate the biggest stalls in 1095-C production, causing most to flee to google for guidance on their specific scenario.

At Benetech, we will be publishing a series of 1095-C case scenarios over the coming months as we enter into the first round of annual reporting. At the end of the blog will be the option to submit your specific 1095-C case that is causing you the most heartburn, and we’ll work on answering as much as we can in the coming months. The more you submit, the more we will research and write.

Scenario 2: Steve is a full-time employee (FTE) of ABC Corporation, and received an offer of minimum essential coverage (MEC) providing minimum value for dependents and his spouse. ABC corporation offers a self-insured health plan, and Steve renewed his coverage on January 1, 2015. On June 15, Steve terminated employment. ABC Corp offered Steve COBRA, but he declined.

This is how ABC Corp will complete Steve’s 1095-C.

1095-C reporting case scenario terminations

Why: During the months of January-May, Steve received an offer of coverage that extended through the entire month. Since Steve was no longer an employee on June 15, and declined COBRA, his coverage offer does not extend throughout the month of June. This is why Steve’s line 14 code changes from 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse) to 1H (No offer of coverage). The coverage offer has to extend the entire month in order to be a 1E.

Steve’s line 16 shows two changes. First, in the months of January-May, Steve was recorded as being enrolled in coverage with code 2C. In June, this code changes to 2B, because Steve terminated coverage before the end of the month. IRS instruction state:

Enter code 2B also if the employee is a full-time employee for the month and whose offer of coverage (or coverage if the employee was enrolled) ended before the last day of the month solely because the employee terminated employment during the month (so that the offer of coverage or coverage would have continued if the employee had not terminated employment during the month).

For the duration of the year, Steve was not employed at ABC Corp. and received code 2A for July-December (employee not employed during the month).

Steve’s Part 3 will look as follows:

Steve’s family is shown as covered through June, because ABC Corporation is required to check each box in which Steve and his dependents had at least one day of coverage during the corresponding calendar month.

To see what Steve’s 1095-C would look like had he accepted COBRA coverage, see our blog on How COBRA Coverage Impacts 1095-C Completion.

This blog is not intended to be legal advice nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.