Without a doubt the most challenging parts of the Form 1095-C to complete are lines 14, 15, and 16. These lines provide critical information to the government regarding an individual’s eligibility for a premium tax credit, the individual mandate, and the employer mandate. Line 14 dictates how line 15 and line 16 should be completed. Therefore, correctly completing line 14 is critical to accurately completing line 15 and line 16.
The instructions to the Form 1095-C state: “The Code Series 1 indicator codes specify the type of coverage, if any, offered to an employee, the employee’s spouse, and the employee’s dependents.” The instructions then go on to lay out the nine options that can be inserted into line 14 for each month of the year. One of the nine line 14 codes must be entered for each calendar month.
Code 1A can be entered for any month a qualifying offer is made. A qualifying offer requires: (1) an offer of minimum essential coverage providing minimum value to a full-time employee; (2) with employee contributions for self-only coverage equal to or less than 9.56 percent of the mainland single federal poverty line; and (3) at least minimum essential coverage offered to the employee’s spouse and dependent. Buried in the regulations upon which the Form 1095-C is based is a statement clarifying the qualifying offer “…an ALE member is treated as offering coverage to an employee’s spouse or dependents even if the employee does not have a spouse or dependent, provided that the employee would have been able to elect such coverage if the employee did have a spouse or dependent.” Therefore, the regulations are clear that an employee who is single with no spouse or dependents can still have 1A inserted on line 14 for any month the other conditions for a qualifying offer are satisfied so long as the employer would have offered coverage to an employee’s spouse or dependents had the employee had any.
If an employer offers minimum essential coverage that provides minimum value for each day of the calendar month but does not meet the requirements for the qualifying offer method (or elects not to utilize the qualifying offer method), the employer will insert 1B, 1C, 1D, or 1E on line 14 of the Form 1095-C depending on to whom the offer of coverage is made. If the employer offers minimum essential coverage that provides minimum value to the employee only, then code 1B will be entered on line 14. If the employer offers minimum essential coverage that provides minimum value to the employee and offers at least minimum essential coverage to the employee’s dependents, then code 1C will be entered on line 14. If the employer offers minimum essential coverage that provides minimum value to the employee and offers at least minimum essential coverage to the employee’s spouse, then code 1D will be entered on line 14. Finally, if the employer offers minimum essential coverage that provides minimum value to the employee and offers at least minimum essential coverage to the employee’s spouse and dependents, then code 1E will be entered on line 14.
To be clear, the line 14 codes only refer to an offer of coverage and in no way depend on what type of coverage the employee accepts. Following the logic provided in the preamble to the regulations upon which the Form 1095-C is based, it is likely the government intends for an employer to enter codes 1B, 1C, 1D, and 1E following the same logic an employer enters code 1A. For example, if an employer offers all its employees minimum essential coverage that provides minimum value and also offers this same coverage to the employee’s spouse and dependents, the employer would enter code 1E for all its employees so long as the employee is eligible for coverage each day of the calendar month. This is true even if there is an employee with no spouse or dependents.
This conclusion is supported by the requirements for using the affordability safe harbors. To utilize the affordability safe harbors the employer must offer its full-time employees and their dependents the opportunity to enroll in minimum essential coverage and the self-only coverage offered to the employee must provide minimum value. Therefore, the government needs to know if the employer’s offer of minimum essential coverage includes an employee’s dependents. If an employer’s offer of minimum essential coverage does not include an employee’s dependents, the employer cannot utilize any of the affordability safe harbors. Consequently, an employer who inserts code 1B or 1D can never insert 2F, 2G, or 2H on line 16 of the Form 1095-C. If an employer does not code line 14 with the logic used in this paper, the government will have no way of determining if an employee is eligible to use the affordability safe harbors.
This interpretation is also supported by the details of the 95 percent rule. The 95 percent rule explains an employer will be treated as offering qualifying coverage to all its full-time employees (and their dependents) for a calendar month, if the employer offers coverage to all but five percent (or, if greater, five full-time employees) of its full-time employees. Just like the affordability safe harbors, the government needs to know if the employer’s offer of minimum essential coverage includes an employee’s dependents to correctly enforce the 95 percent rule. While the structure of the Form 1094-C and Form 1095-C enforce the 95 percent rule in Part III column (a) of the Form 1094-C, the code entered on line 14 of the Form 1095-C could be a way for the government to verify the employer’s answers on the Form 1094-C.
Finally, it would be illogical for the government to apply one set of rules to code 1A and a separate set of rules to codes 1B, 1C, 1D, and 1E. An employer should complete line 14 using the same logic it uses to enter code 1A when determining whether to enter code 1B, 1C, 1D, or 1E and treat an employer as offering coverage to an employee’s spouse or dependents even if the employee does not have a spouse or dependent, provided that the employee would have been able to elect such coverage if the employee did have a spouse or dependent.
The instructions to line 14 are far from clear and could certainly be clarified in future years. However, read in context with the preamble to the final regulations, the requirements of the affordability safe harbors and the 95 percent rule, no other conclusion makes sense. Therefore, an employer should enter the line 14 code the employee would have been able to elect if the employee had a spouse or dependents.
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