Draft 2020 1094-C & 1095-C Released

At A Glance

• IRS made available draft Form 1094-C & 1095-C
• Draft Form 1094-C has no notable changes
• Employee’s Age on January 1 data field has been added to Form 1095-C, Part II
• A new Line 17 has been added to Form 1095-C, Part II labeled “Zip Code”
• Eight additional Series 1 Codes have been added for use on Line 14, Form 1095-C to report Individual Coverage HRAs (ICHRAs)
• Seven additional Series 1 Codes have been added and labeled as “reserved for future use”

Introduction

On July 13, 2020, the IRS published the draft Form 1094-C and draft Form 1095-C for the 2020 tax year. While the forms are not the final version, currently the Form 1094-C remains unchanged. However, there are some significant updates to the 1095-C draft form from the 2019 version. These include two new additions in Part II: a data field labeled “Employee Age on January 1” and a newly added Line 17 labeled “Zip Code”. In addition, the draft 1095-C does provide insight into how offers of Individual Coverage Health Reimbursement Arrangements (ICHRAs) will be reported. The draft recipient instructions includes eight new Series 1 codes to use on Line 14  to report coverage related to an employer’s offer of an Individual Coverage Health Reimbursement Arrangement (ICHRA) as well as seven other new Series 1 codes that are noted as “reserved for future use”.

Background

ICHRAs are the new type of HRA that can be integrated with individual market coverage or Medicare. Final rules issued in 2019 clarify that ICHRAs are group health plans and must meet affordability and minimum value in order to avoid any of the Employer Shared Responsibility Provision (ESRP) penalties. Proposed rules, also published in 2019 seek to further clarify how to determine affordability for ICHRAs and can be relied on for plan years beginning on January 1, 2020 until six months after any final rules are issued. The new codes on the draft 1095-C incorporate the affordability safe harbors from the proposed rules.

Next Steps

Updated instructions for Form 1095-C are anticipated and will likely include additional guidance on how to use the new codes. Paylocity will provide updates as additional details become available.

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This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.