The IRS recently published the draft versions of Form 1094-C and Form 1095-C for the 2016 reporting period. Draft instructions have not been published. Although there are very few changes, there are four important revisions to consider.
Changes to Form 1094-C
- Changes to Form 1094-C, Part II, Line 22: This section of the Form 1094-C gave many employers headaches last year. There was confusion about what it meant to make a Qualifying Offer and other questions. In the draft Form 1094-C, the IRS changed Box B in Line 22 to “reserved.” Watch for changes to this particular option or removal for the 2016 reporting period. Absent changes in the instructions, this is the only noticeable change in the 2016 draft Form 1094-C.
Changes to Form 1095-C
- Form 1095-C, Part II, Plan Start Month: The cover page for the draft Form 1095-C indicates that the “Plan Start Month” field in Part II will remain optional for the 2016 reporting period.
- Form 1095-C, Part II, Line 14 Code 1I: The draft Form 1095-C shows two new Series 1 codes. The Series 1 codes are used to populate Line 14 in Part II. Code 1I is now reserved, but was previously used to indicate Qualifying Offer Transition Relief. This code may be eliminated when the Form 1095-C is finalized.
- Form 1095-C, Part II, Line 14 Code 1J and 1K: The draft also shows two new codes that will indicate conditional offers to spouses. A conditional offer to a spouse typically occurs when an employer does not permit a spouse to be enrolled in the plan if the spouse has access to health insurance through their own employer. We expect the draft instructions to include additional detail on these new codes when they are published.
Awaiting Further Instructions
The lack of significant changes is good news for employers. We expect the instructions for 2016 to clarify the definition of a conditional offer to a spouse. The instructions will also include any additional codes in Series 2 for 2016. Reporting systems may be able to streamline the data collection process and formulas used to populate the forms, resulting in fewer errors. Nevertheless, employers should use the remaining months in 2016 to ensure data is accurate and uploaded timely to a vendor’s system. Identifying errors early and correcting them will be an important part of the 2016 reporting process.