1095-C/1094-C Forms: Meaning of Terms
The Affordable Care Act (ACA) generated many new terms specific to the law. Without knowing how to decipher many of these new terms, the reporting process may feel a bit overwhelming. Below is a helpful list of ACA-specific terms and definitions to help you gain a better understanding of the rules.
This is the period after the end of a measurement period — and before the beginning of the stability period associated with the measurement period — during which the employer can perform administrative tasks, such as calculating the hours for the measurement period, determining eligibility for coverage, providing enrollment materials to eligible employees and conducting open enrollment.
This is the employee’s required contribution for self-only coverage that does not exceed 9.5% of the employee’s income from the employer.
Aggregated ALE Group
This refers to the controlled group of applicable large employers (ALEs) under federal law. Companies could be in a controlled or affiliated service group if they have common owners, provide services for each other or work together to provide services to third parties.
Aggregated Group Indicator
Column (d) of Part lll of Form 1094 is where the ALE indicates whether it is part of an Aggregated ALE Group.
Aggregated Group Member
A member of the controlled group of employers.
Applicable Large Employer (ALE)
An ALE is an employer that employed (along with members of its controlled group) an average of at least 50 “full-time employees” (including full-time equivalent employees) on business days during the preceding calendar year.
Form 1094-C contains all aggregated ALE Group information. This means that Lines 20 – 22 of Part II, Part III and Part IV are completed.
Designated Government Entity
A person or persons who are part of or related to the Governmental Unit that is the ALE Member and that is appropriately designated for purposes of these reporting requirements. Nevertheless, “the Governmental Unit must ensure that among the multiple Forms 1094-C filed by or on behalf of the Governmental Unit transmitting Forms 1095-C for the Governmental Unit’s employees, one of the filed Forms 1094-C is designated as the Authoritative Transmittal and reports aggregate employer-level data for the Governmental Unit, as required in Parts II, III, and IV of Form 1094-C.”
Any common law employee. This term excludes a sole proprietor, a partner in a partnership, an S corporation shareholder who owns at least 2% of the S corporation, a leased employee within the meaning of section 414(n) of the Code, or a worker who is a qualified real estate agent or direct seller.
Form W-2 Safe Harbor
A method that allows the ALE to use each employee’s W-2 income (Box 1) from the current year to determine affordability.
An employee who, for any month, works at least 30 hours per week. 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week.
Full-Time Equivalent Employee
Created for any month by dividing the total number of part-time employee hours by 120. This is used to determine whether the employer is an ALE in any calendar year. The employer is not obligated to provide coverage to these employees.
Benefits are provided under an insurance policy or contract.
Initial Measurement Period
This is a measurement period for new employees. It begins on the new employee’s hire date of the beginning of the month after the employee’s actual hire date.
Limited Non-Assessment Period
This generally refers to a period during which an ALE member will not be subject to an employer shared responsibility penalty under Code § 4980H for a full-time employee, even if the employee is not offered health coverage during that period. An employer will not be subject to a penalty under Code § 4980H(a), and in certain cases Code § 4980H(b), with respect to an employee in the following circumstances:
- The transition rule for an employer’s first year as an applicable large employer
- The application of Code § 4980H for the three full calendar month period beginning with the first full calendar month in which an employee is first otherwise eligible for an offer of coverage, under the monthly measurement method
- The application of Code § 4980H during the initial three full calendar months of employment for an employee reasonably expected to be a full-time employee at the start date, under the look-back method
- The application of Code § 4980H during the initial measurement period to a new variable-hour employee, seasonal employee or part-time employee determined to be employed on average at least 30 hours of service per week, under the look-back measurement method
- The application of Code § 4980H following an employee’s change in employment status to a full-time employee during the initial measurement period, under the look-back method
- The application of Code § 4980H to the calendar month in which an employee’s start date occurs on a day other than the first day of the calendar month.
Mainland Single Federal Poverty Line
This is a measure of income that is issued every year by the Department of Health and Human Services (HHS). Federal poverty levels are used to determine eligibility for certain programs and benefits, such as savings on Marketplace health insurance coverage, Medicaid and the Children’s Health Insurance Program (CHIP).
The period of time the ALE uses to determine if a variable hour employee is full-time. It can be a 3- to 12-month period. There is one measurement period for new employees and another measurement period for ongoing employees.
Minimum Essential Coverage (MEC)
This applies to any employer-sponsored group health plan with medical benefits. Excepted benefits (e.g., most types of dental and vision plans, flexible spending accounts [FSAs], employee assistance programs [EAPs], and fixed indemnity plans) are not MEC.
Minimum Value Coverage (MV)
The minimum essential coverage plan’s share of total allowed cost of benefit that is at least 60% of such costs.
98% Offer Method
If an ALE provides MEC with MV to at least 98% of the ALE’s full-time employees, the ALE does not need to complete Column (b) of Part lll of Form 1094-C.
An employee who has been employed for at least one complete standard measurement period.
An employee who is neither a full-time employee nor a variable hour employee.
An offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than approximately $1,100 (9.5% of the Federal Poverty Level), combined with an offer of coverage for the employee’s family.
Qualifying Offer Method
For employees who receive qualifying offers for all 12 months of the year, ALEs need to report only the names, addresses and tax ID numbers of those employees and the fact that they received a full‐year qualifying offer. The employer is not required to report monthly, employee‐specific information on these employees.
Qualifying Offer Method Transitional Relief
For employees who receive qualifying offers for fewer than 12 months of the year, the employer may use a code for each month a qualifying offer was made.
Rate of Pay Safe Harbor
To determine monthly affordability, an employer (1) takes the hourly rate of pay for each hourly employee who is eligible to participate in the health plan, and (2) multiplies that rate by 130 hours per month.
For purposes of Form 1095-B, this may be the primary insured employee, former employee, parent, uniformed services sponsor or other person enrolling individuals in coverage.
An employee who is hired into a position for which the customary annual employment is 6 months or less.
Section 4980H Transition Relief
If an ALE is taking advantage of (1) transition relief for large employers with 50 – 99 full-time employees, i.e., not offering all full-time employees affordable coverage with minimum value until the following year, or (2) transition relief for the purpose of calculating an employer mandate assessable payment with 100 or more full-time employees, i.e., there is no penalty for those months that preceded the first day of the plan year, it must check Box C on line 22 on Form 1094-C. If an employer checks this box, it must also complete Part III, Column (e) of this form, Code § 4980H Transition Relief Indicator, to indicate the type of transition relief (A or B) for which it is eligible. [Symbol correct instead of word ‘Section’ as previously?]
Section 4980H Transition Relief Indicator
If Box C is checked on line 22 of form 1094-C, the ALE needs to identify what type of transition relief applies to it for the year in question on Column (e) of Part lll of Form 1094-C. There are two types of transition relief available for a large employer. Type “A” applies to a business in the 50 – 99 full-time employee range that will not be subject to the employer mandate at all. Type “B” applies to employers with 100 or more full-time employees during a specific calendar year, but the employer’s plan year is a non-calendar year excusing it from compliance for the months that preceded the start of its plan year.
Self-Insured or Self-Funded
Under Code § 105(h)(6), a self-insured or self-funded health plan is “a plan of an employer to reimburse employees for expenses referred to in Code § 105(b), which cross-references expenses for medical care under Code § 213(d) for which reimbursement is not provided under a policy of accident and health insurance.” Thus, a self-insured health plan is a type of accident or health plan that provides reimbursement for Code § 213(d) medical expenses and that is not insured.
This coverage period follows, and is associated with, a particular measurement period.
Standard Measurement Period
A measurement period for ongoing employees.
Variable Hour Employee
An employee for whom, based on the facts and circumstances at the employee’s start date, the ALE Member cannot determine whether the employee is reasonably expected to be employed on average at least 30 hours of service per week during the initial measurement period because the employee’s hours are variable or otherwise uncertain.