Potential New Codes Added to Form 1095 for the New Reporting Year

Potential New Codes Added to Form 1095 for the New Reporting Year

If your organization has implemented an ICHRA plan for its employees or are considering doing so, you should be aware of two small but important changes that the IRS has issued to the draft Form 1095-C for ACA reporting for tax year 2021.

The acronym, ICHRA, stands for Individual Coverage Health Reimbursement Arrangement. First made available in 2020, employers of any size can use an ICHRA to reimburse employees for some, or all of the premiums that employees pay to purchase health insurance on their own. To accommodate for this new type of reimbursement, the IRS made changes last year to Form 1095-C for 2021 reporting.

This year, the IRS has introduced two new codes to the 2021 reporting form draft:

  • Code 1T applies when an ICHRA was offered to an employee and spouse without dependents. The affordability of the plan is determined using the zip code of the employee’s primary residence.
  • Code 1U applies when an ICHRA was offered to an employee and spouse without dependents. The difference with this code is that the plan’s affordability is determined using the zip code of the employee’s primary employment site.

While these changes have not been finalized, it’s important to remember to always populate your 1095 forms using the proper codes, as it appears the IRS is more closely scrutinizing employer filings for accurate reporting.

Health e(fx) is here to help you keep up with and understand the latest changes and how they affect you. We will be closely monitoring these and any additional change as the IRS issues final instructions for 2021 reporting.