Question: How do employers report COBRA coverage on the Form 1095-C?

Short Answer: Employers with fully insured medical plans must address COBRA in ACA reporting only where the qualifying event is triggered by a reduction in hours.  Employers with self-insured medical plans must report COBRA coverage in all situations because of the §6055 coverage reporting requirements in Part III of the Form 1095-C.

ACA Reporting: General Rule

The ACA requires Applicable Large Employers (ALEs) subject to the ACA employer mandate to report whether they offered medical coverage (i.e., minimum essential coverage) that was affordable and provided minimum value to full-time employees.  This reporting is generally handled via IRS Forms 1094-C and 1095-C.

Applicable large employers (ALEs) provide the Form 1095-C to full-time employees and certain other individuals. If the plan is fully insured, the insurance carrier also provides the Form 1095-B to covered individuals (in addition to the Form 1095-C provided by the ALE), subject to relief such as the 2020 section 6055 furnishing relief.

If the plan is self-insured (including level-funded), all of the ACA reporting information for ALEs is included in the Form 1095-C prepared by the employer (i.e., such individuals will not receive a Form 1095-B).  Although Congress effectively repealed the ACA individual mandate in the Tax Cuts and Jobs Act as of 2019 by zeroing out the tax penalty, employers with a self-insured plan are still required to report the months of coverage for the employee and any covered dependents.

Note: Non-ALEs sponsoring a self-insured plan (including level-funded) must provide covered individuals with the Form 1095-B (not the Form 1095-C).

For more details from an employer perspective:

• Last Call: Final 30-Day Extension for 2020 ACA Reporting Forms Furnished in 2021

• Key Decision Points in ACA Reporting Vendor Setup Questionnaires

• Newfront ACA Employer Mandate Pay or Play and ACA Reporting Guide

For more details from an employee perspective:

• Newfront ACA Reporting Infographic for Employees: Fully Insured

• Newfront ACA Reporting Infographic for Employees: Self-Insured

• Newfront ACA Reporting Infographic for Employees: Fully Insured and Self-Insured

Fully Insured Plan COBRA ACA Reporting: Termination of Employment Qualifying Event

Most COBRA qualifying events are the result of a loss of coverage caused by termination of employment.  There are no ACA reporting requirements to address this common scenario for a fully insured plan.

For those individuals who were a full-time employee for any month of the year, they will still receive a Form 1095-C. However, for the months following the termination, the coding in Part II will show the standard termination of employment coding regardless of whether the employee was offered or enrolled in COBRA.

Those post-termination months will simply show that the individual was not offered coverage and no longer an employee:

Termination of Employment—Months After Termination

• Line 14: 1H (not offered coverage)

• Line 15: Blank (per instructions when using 1H in Line 14)

• Line 16: 2A (not employed during month)

• Note: Not affected by COBRA offer or enrollment.

COBRA qualified beneficiaries who were not a full-time employee for any month in the year (e.g., because they terminated employment in a previous year) will not receive a Form 1095-C.

The insurance carrier is responsible for reporting the COBRA qualified beneficiaries’ coverage information on the separate Form 1095-B prepared, furnished (subject to the 2020 section 6055 furnishing relief), and filed by the carrier.  The employer plays no role in the Form 1095-B carrier coverage reporting for fully insured plans.

Fully Insured Plan COBRA ACA Reporting: Reduction in Hours Qualifying Event

The only COBRA-related ACA reporting requirements for employers with a fully insured plan applies for situations where the employee’s qualifying event is a loss of coverage caused by reduction in hours (e.g., full-time to part-time).

For the months following the qualifying event, the coding for an employee who enrolls in COBRA will show that the employee was offered coverage at the self-only COBRA rate and was covered under the plan:

Reduction in Hours—Months After Qualifying Event and with COBRA Enrollment

• Line 14: 1B (employee-only coverage) or 1E (family coverage)

• Line 15: COBRA self-only employee required contribution (per IRS FAQ guidance)

• Line 16: 2C (enrolled in plan)

If the employee declines COBRA, the coding in Line 16 will instead reflect that the employee is no longer full-time for the months following the qualifying event:

Reduction in Hours—Months After Qualifying Event and Declining COBRA

• Line 14: 1B (employee-only coverage) or 1E (family coverage)

• Line 15: COBRA self-only employee required contribution (per IRS FAQ guidance)

• Line 16: 2B (employee but not a full-time employee)

• If the employer is using the look-back measurement method and the employee is still in a stability period as full-time, Line 16 will be blank (exposing the employer to potential B Penalty).

COBRA qualified beneficiaries who were not a full-time employee for any month in the year (e.g., because they reduced hours to part-time in a previous year) will not receive a Form 1095-C.

The insurance carrier is responsible for reporting the COBRA qualified beneficiaries’ coverage information on the separate Form 1095-B prepared, furnished (subject to the 2020 section 6055 furnishing relief), and filed by the carrier.  The employer plays no role in the Form 1095-B carrier coverage reporting for fully insured plans.

Self-Insured Plan COBRA ACA Reporting: Covered Employee COBRA Enrollments

In addition to the ACA reporting related to COBRA that fully insured plans must address with reduction-in-hours qualifying events, self-insured plans (including level funded plans) must also report on all COBRA enrollments to satisfy their §6055 coverage reporting requirements.

Part II of the Form 1095-C for individuals who were a full-time employee for at least one month in the year will be the same as discussed above for fully insured plans.  The difference for self-insured plans is the addition of the coverage information completed in Part III for all months of active or COBRA coverage.

For individuals whose active coverage terminated in a prior year but were enrolled in COBRA for at least one month in the reporting year, the Part II coding will reflect that the individual was not an employee for any month of the year:

Active Coverage Ended Previous Year—COBRA Enrollee

• Line 14: 1G (not an employee for all 12 months)

• Line 15: Blank (per instructions when using 1G in Line 14)

• Line 16: Blank (per instructions when using 1G in Line 14)

• Part III: Coverage information completed for months of COBRA coverage

• The employer may choose to report for the former employee on a separate Form 1095-B instead.

Self-Insured Plan COBRA ACA Reporting: Separate Spouse/Dependent COBRA Enrollments

If the COBRA enrollee is a spouse or a dependent who separately elected COBRA, the IRS FAQ guidance states that the employer should separately report the spouse’s or dependent’s coverage on their own Form 1095-C.  This means the spouse’s or dependent’s name and information will be entered in Part I as though they were the employee.

The following coding addresses a common situation where this occurs when an employee and spouse divorce, and the divorced spouse enrolls in COBRA:

Divorce Causes Loss of Coverage—Former Spouse COBRA Enrollee

• Part I: Completed using former spouse’s information

• Line 14: 1G (not an employee for all 12 months)

• Line 15: Blank (per instructions when using 1G in Line 14)

• Line 16: Blank (per instructions when using 1G in Line 14)

• Part III: Coverage information completed for months of COBRA coverage only (if the divorce occurred in the reporting year, the period of active coverage as a spouse prior to divorce is reported on the employee’s Form 1095-C)

• The employer may choose to report for the former spouse on a Form 1095-B instead. The Form 1095-B alternative is required if the employer does not have the former spouse’s Social Security number.

Where to Find More Information

• IRS Forms 1094-C and 1095-C Instructions: https://www.irs.gov/instructions/i109495c

• IRS Forms 1094-C and 1095-C FAQs (Beginning at Q/A-22): https://www.irs.gov/affordable-care-act/employers/questions-and-answers-about-information-reporting-by-employers-on-form-1094-c-and-form-1095-c