IRS 1095-C Reporting Requirements for ICHRAs

In our previous blog, we introduced the basics of an ICHRA (Individual Coverage Health Reimbursement Arrangement) plan and highlighted some of the unique advantages it offers to employers. In this post, we’re diving deeper into IRS 1095-C reporting requirements for employers who utilize ICHRAs, outlining key details and considerations for end-of-year reporting.

Understanding IRS 1095-C Reporting Requirements for ICHRAs

Employers who offer health coverage through an ICHRA must navigate specific IRS 1095-C reporting requirements to remain compliant with the Affordable Care Act (ACA). These reporting details, including new line codes and affordability considerations, are essential for proper documentation and submission.

New IRS 1095-C Reporting Requirements: 

1. IRS Line 14: Contrary to the typical line 14 coding you may be used to, employers who use a ICHRA will use the following for an offer of coverage code:
   1. • 1L. Individual coverage HRA offered to employees only with affordability determined by using employee’s primary residence location ZIP code.
   2. • 1M. Individual coverage HRA offered to employee and dependent(s) (not spouse) with affordability determined by using the employee’s primary residence location ZIP code.
   3. • 1N. Individual coverage HRA offered to employee, spouse, and dependent(s) with affordability determined by using employee’s primary residence location ZIP code.
   4. • 1O. Individual coverage HRA offered to employees only using the employee’s primary employment site ZIP code affordability safe harbor.
   5. • 1P. Individual coverage HRA offered to employee and dependent(s) (not spouse) using the employee’s primary employment site ZIP code affordability safe harbor.
   6. • 1Q. Individual coverage HRA offered to employee, spouse, and dependent(s) using employee’s primary employment site ZIP code affordability safe harbor.
   7. • 1R. Individual coverage HRA that is NOT affordable offered to employee; employee and spouse, or dependent(s); or employee, spouse, and dependents.
   8. • 1S. Individual coverage HRA offered to an individual who was not a full-time employee.
   9. • 1T. Individual coverage HRA offered to employee and spouse (not dependents) with affordability determined using employee’s primary residence location ZIP code.
   10. • 1U. Individual coverage HRA offered to employee and spouse (not dependents) using employee’s primary employment site ZIP code affordability safe harbor.

1. IRS ICHRA Affordability: As noted in the line 14 codes above, employers are given options on how to determine affordability of ICHRAs. The IRS rule allows employers to use the lowest cost silver plan for single coverage under the employers or employees’ zip code: https://www.irs.gov/newsroom/health-reimbursement-arrangements-hras. There are also plan cost resources provided by the IRS here to help employers identify the lowest silver plan available for any zip code: https://www.cms.gov/marketplace/private-health-insurance/health-reimbursement-arrangements Another item of consideration is any allowance given to the employee which is also factored into the affordability calculation.

1. IRS Part 3 Requirements for ICHRA: In addition to the changes to affordability, the IRS also has requirements for Part-3 of the 1095-C for employees enrolled in an ICHRA plan. Part-3 contains a listing of all individuals who are enrolled in the plan, including the employee, dependents and spouses. This section must be completed if an individual is enrolled in ICHRA coverage for any month of the year.

Key Takeaways for IRS 1095-C Reporting Compliance

In summary, the ICHRA model can be a compliant and flexible way for employers to offer health benefits under the ACA but there are additional complexities for IRS year end reporting on the 1095-C for employers. Navigating new line 14 codes, affordability rules and Part-3 requirements can pose a new challenge for employers who may not be familiar with these new requirements. 

Let us help you – please reach out to clientservices@paragoncompliancellc.com for a quote or call us today!