Frequently Asked questions regarding the affordable care act (ACA) and IRS Forms 1095-B and 1095-C

The following Frequently Asked Questions (FAQs) have been developed to assist employees and Human Resources in understanding the administration of the Affordable Care Act (ACA).

Categories

General

There is no difference. These are different names for the same law. Within this document, we will refer to the law as the ACA.

The law currently remains in effect. We will continue to monitor all legislative activity relating to the ACA and will provide updates as information becomes known.

On December 14, 2018 the Federal District Court issued a ruling finding that the ACA is unconstitutional in its entirety. While the future of this litigation is unknown, it is important to emphasize that the ACA remains the law.

Most Americans and other people legally in the U.S. must have “minimum essential” coverage, or they will have to pay a penalty when they file their federal income tax return for the year in which they don’t have coverage. This is otherwise known as the “individual mandate.” Effective January 1, 2019 the Individual Mandate penalty has been reduced to $0.

In 2016, all Applicable Large Employers (ALEs) must offer affordable minimum essential coverage (MEC) that provides minimum value to 95% of their full-time employees (and dependents) as defined by the ACA. (See Q-E1) This is also known as the “employer mandate” or the “employer shared responsibility provision.”

The Health Insurance Marketplace was designed to help Americans find individual health insurance that meets their needs and budget. The Marketplace offers “one-stop shopping” to find and compare private health insurance options. Depending on household income and size, they may be eligible for a tax credit that lowers their monthly premium.

Employees that have coverage through their employer pay their insurance premiums with pre-tax dollars. They are not able to purchase coverage through the Health Insurance Marketplace using pre-tax dollars. Employees that have coverage through their employer are likely eligible for the employer contribution of their insurance premium. However, if they purchase individual health insurance coverage through the Health Insurance Marketplace, they must pay the entire cost of the insurance premium (there is no employer contribution to coverage through the Marketplace).

The Health Insurance Marketplace may offer more choices than most employer plans. If the employer does not provide coverage that meets requirements for minimum value and affordability, and their income is low enough, they may be able to get a tax credit if they buy coverage through the Health Insurance Marketplace. Note: The State of Wisconsin health insurance programs available through the University meet the requirements for affordability and minimum value under the ACA.

ACA Tax Forms

Form 1095-A is the Health Insurance Marketplace statement. Individuals will get this statement if they bought health coverage through the "Marketplace" - the web-based insurance markets that the federal government and states set up under the ACA.

Form 1095-B is a statement from the individual’s health insurance company verifying that they and other members of their household had insurance coverage that met the requirements of the ACA during the prior year. This is for people whose coverage was fully insured with an insurance carrier (includes all offered health plans except Access Plan, Access HDHP and SMP).

Called the Individual Mandate, the information provided on Form 1095-B contains information that enables the IRS to determine whether an individual has complied with the Individual Mandate or whether that person is subject to a penalty. Effective January 1, 2019 the Individual Mandate penalty has been reduced to $0. More information may be found at:

Form 1095-C is a statement from the employer providing details about the health coverage offered by the employer and whether or not the employee chose to participate. Individuals that purchased health insurance coverage through the Health Insurance Marketplace will use the information found on this form to determine if they are eligible for a premium tax credit.

More information: www.irs.gov/Affordable-Care-Act/Individuals-and-Families

Beginning in 2016, employers must file Forms 1095-C with the IRS to report information about the offers of health coverage made to full-time employees during the previous calendar year and provide copies of Forms 1095-C to those employees. Like W-2s, copies of Forms 1095-B and/or 1095-C are provided to employees early in the calendar year for the previous year, subject to federal deadlines.

Employees will receive a Form 1095-C if they were a full-time employee (as defined by the ACA) for all or some months of the prior calendar year. They receive a copy of the Form 1095-C so they know what information has been reported to the IRS about the offer of health coverage made to them and their family. More information: www.irs.gov/Affordable-Care-Act/Questions-and-Answers-about-Health-Care-Information-Forms-for-Individuals.

Beginning in 2016, the insurance carrier must file one copy of Form 1095-B with the IRS and furnish another copy to the individual for whom coverage was provided during the previous calendar year. The employee receives a Form 1095-B because the insurance carrier provided either them and/or their family member(s) with health coverage during the previous calendar year.

The information included on Form W-2, Box 12, code DD states the total cost (employee & employer share) of the employer-sponsored health insurance that the employee was enrolled in during a single calendar year. It does not show the months in which they enrolled in coverage or the lowest cost (employee share), employee-only coverage offered.

Forms 1095-B and 1095-C show enrollment information on a monthly basis and include information about the lowest cost (employee share), employee-only coverage offered. Thus, the Form W-2 contains different information than Forms 1095-B and 1095-C.

Generally, no. Form 1095-Cs are only required to be provided to full-time employees. As for Form 1095-B, all family members that are covered through the employee’s enrollment (for example, because they elected family coverage) should appear on the same Form, which is required to be provided to the employee as the “responsible individual.” However, in some instances, a spouse and/or dependent may receive his/her own copy of Form 1095-B if he/she independently enrolls in COBRA coverage and the employee does not enroll in COBRA coverage (e.g., divorce).

If a spouse and/or dependent is also employed full time, he or she may receive these forms from his or her employer as well.

Retain both Forms 1095-B and 1095-C with tax records. While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers do not need wait for these forms to file their returns.

Review the IRS website for information on what is needed to file taxes.

The codes used on line 14 on Form 1095-C are intended to provide information about the type of coverage that is offered. Generally, the codes explain whether the health coverage offered to the employee and their spouse and dependent children is considered “minimum essential coverage” (“MEC”) and provides “minimum value.”

MEC is generally any type of employer-sponsored health coverage, certain types of governmental coverage such as Medicare or Medicaid, and other types of health coverage specifically identified by the Department of Health and Human Services. “Minimum value” is provided by the plan if it pays at least 60% of the costs of benefits and provides inpatient hospitalization services and physician services. The type of coverage reported on Form 1095-C is employer-sponsored coverage. There is an explanation of the codes on the back of Form 1095-C.

The dollar amount on line 15 of Form 1095-C represents the lowest cost that an employee pays for minimum value, employee-only health coverage under our plan. This may or may not be the coverage the employee is enrolled in. There is an explanation of the codes on the back of Form 1095-C.

The codes used in line 16 serve two purposes. Codes 2A – 2D help the IRS determine whether the individual could qualify for a premium tax credit if they were to purchase health insurance coverage through the Marketplace. For example, if code 2C is included for any month on line 16, that code indicates they have enrolled in employer-sponsored coverage. For any month they are enrolled in coverage with us, they cannot qualify for a premium tax credit in connection with purchasing coverage through the Marketplace for that month. Codes 2E – 2I inform the IRS about whether we fall within any of the safe harbors from penalties under the Employer Mandate.

There are various codes used on line 16 on Form 1095-C. Codes 2F, 2G, and 2H indicate whether coverage is “affordable” as that term is used under the Employer Mandate. For coverage to be “affordable,” the cost of employee-only coverage for the least expensive, minimum value plan must be less than 9.83% (for 2021) or 9.61% (for 2022) of their compensation from the UW System. That “affordability” may be calculated using one of three “safe harbors.” See Question F13 for an explanation of the affordability safe harbors. There is an explanation of the codes on the back of Form 1095-C.

There are three affordability “safe harbors” that allow the UW System to determine if the cost of the group health plan is affordable to an eligible employee. The three safe harbors are:

  1. Form W-2 safe harbor– If we offer full-time employees and their dependent children the opportunity to enroll in our plan, we can compare the employee contribution of self-only coverage for our lowest cost plan that meets the minimum value against their current W-2 wages as reported in box 1 of Form W-2. If the cost of the coverage for self-only coverage does not exceed 9.86% (for 2021) or 9.61% (for 2022) of wages as described above, the coverage is affordable. Application of this safe harbor is determined after the end of the calendar year on an employee-by-employee basis, per their W-2 wages and the required employee contribution for that year.
  1. Rate of pay safe harbor – For hourly employees, we can, on a monthly basis (1) take the lower of the hourly rate of pay as of the first day of the coverage period (generally the first day of the plan year) or the lowest hourly rate of pay during the calendar month, (2) multiply that rate by 130 hours per month, and (3) determine affordability based on the resulting monthly wage amount. Specifically, an employee’s monthly contribution amount (for the employee-only premium of the lowest cost coverage that provides minimum value) is affordable if it is equal to or less than 9.86% (for 2021) or 9.61% (for 2022) of the computed monthly wages (that is, the applicable hourly rate of pay x 130 hours). For non-hourly employees (e.g., salaried employees), the UW System can compare the contribution for employee-only coverage to the monthly salary as of the first day of the coverage period.
  1. Federal poverty line safe harbor – Coverage will be affordable if the cost for employee-only coverage under the lowest cost plan does not exceed 9.86% (for 2021) and 9.61% (for 2022) of a monthly amount determined as the federal poverty line for a single individual in the state in which the employee resides, divided by 12. We are permitted to use the federal poverty line guidelines in effect six months prior to the beginning of the plan year.

If employees have any questions regarding Form 1095-B, they should contact their health plan. If they have questions regarding Form 1095-C, they should contact UW-Shared Services, Service Operations at serviceoperations@uwss.wisconsin.edu or (888) 298-0141 (7:45-4:30 p.m. Monday-Friday).

Eligibility

Under the ACA, the definition of full-time includes employees paid an average of 130 hours/month (30 hours week). This includes paid vacation leave, sick leave, jury duty pay, etc. Status as a full-time employee under the ACA does not affect the employee’s status as a full-time or non-full-time employee for any other purpose.

Employees hired into a position with a known expectation of working at least 30 hours per week are counted as full-time employees for purposes of the ACA. This includes employees with an FTE assigned of at least 75% and employees who meet Wisconsin Retirement System (WRS) participation standards and are eligible for insurance or meet the full time requirements through the initial or standard measurement periods for the duration of the subsequent stability period.

Employees hired into a position with a known expectation of working less than 30 hours per week are counted as part-time employees for purposes of the ACA. This includes employees with an FTE assigned of less than or equal to 74%, but greater than .00625% (.0025 standard hours).

Employees hired into a position with an unknown expectation for hours, such as Student Help, University Staff- Temporary and Academic Staff with an FTE of 0.00625% (.0025 standard hours) are counted as variable hour/seasonal employees for purposes of the ACA.  These employees are typically in the NON or LMT benefit programs in HRS.

If, based on the facts and circumstances at the date the employee begins working (the start date), it cannot be determined whether the employee is reasonably expected to work on average at least 30 hours per week, that employee is a variable hour employee.

See Glossary for definition of “seasonal employee”.  

Rehired Annuitants are offered coverage through the Rehired Annuitant process at either the time of hire and/or when eligible to elect participation in the WRS (if not initially eligible) through a change in WRS eligibility or WRS look back process. That WRS process is going to be considered the offer of coverage for the individual as they would be eligible to participate in the State Group Health Insurance Program if he/she elects to come under the WRS. 

Moving forward, we recommend that institutions continue to assist us with developing processes for an annual notice to WRS-eligible Rehired Annuitants that they may enroll in the WRS and be eligible to participate in the State Group Health Insurance Program through employment. In conjunction with the annual enrollment season for active employees, employers must provide a notice to rehired annuitants that they may stop their annuity payment at any time and enroll on the same terms as active employees. This is currently accomplished through an email sent to rehired annuitants during the Annual Benefits Enrollment Period.

No. For employees of educational institutions, a 12-month measurement period is permitted but a special rule applies that says for employment break periods (e.g., summer break) of four or more consecutive weeks, we must either:

  • Determine the average hours of service per week for the employee during the measurement period excluding the employment break period and use that average as the average for the entire measurement period; or
  • Credit the employee with hours of service for the employment break period at a rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not part of an employment break period (but no more than 501 hours of service are required to be credited). Employees who work during the active portions of the academic year cannot be treated as seasonal employees.

Measurement Period

A measurement period is the timeframe used to determine employees' employment status under the ACA based on the average number of hours worked. The status earned during the measurement period as either full-time or part-time (for purposes of the ACA only) will be used during the corresponding stability period. 

There are two types of measurement periods - initial and standard. All employees may be subject to the "standard measurement period" while only some employees are subject to an "initial measurement period" upon hire. 

Newly hired variable hour or seasonal employees not otherwise eligible for health insurance coverage are subject to a 12-month initial measurement period. 

The initial measurement period begins the first of the month following the employee’s date of hire and goes for 12 months. There is also a 1-month administration period after the measurement period and before the 12-month stability period begins.

The standard measurement period begins on October 1st and ends on September 30th of the following year. The standard measurement period is immediately followed by an administrative period of 3-months and the corresponding 12-month stability period begins on January 1st of the following year.

The IRS states that an hour of service means each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer, and each hour of regular or overtime for which an employee is paid, or entitled to payment, for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Under the final regulations, an hour of service does not include any hour of service performed as a bona fide volunteer or as part of a Federal Work-Study Program (or a substantially similar program of a State or political subdivision thereof).

Yes, all hours of service must be included in the calculation, including hours worked in excess of 40, paid as overtime.

The answer varies based on how long the break in service is. See below.

Length of Break in ServiceImpact on Measurement/ Stability Period

Less than 4 consecutive weeks

Continue existing measurement & stability periods; zero hours will be considered during break to determine average hours.
*Break is at least 4 but less than 26¹ consecutive weeksContinue existing measurement & stability periods; break is not counted against employee. Break period will be excluded in averaging hours.
26¹ or more consecutive weeksConsider as rehire; begin a new initial measurement period.

Active employees in the types of leave status below should not have the time counted against them during the measurement period; instances where these leaves apply will have the break periods excluded when calculating average hours:

  • FMLA leave
  • Military leave
  • Jury Duty
  • Educational breaks when not scheduled to work (e.g.,summer months for 9-month term employees)

¹13 weeks if break period is NOT tied to a scheduled academic break (Under review given IRS FAQ’s 2015-87 from 12/2015).

*NOTE: If break period is greater than prior employment, then employee may be considered a rehire and is subject to a new initial measurement period.

 

Measurement Periods and Breaks in Service

Review the ACA Measurement Periods and Breaks in Service Decision Tree.

Student Employees

The UW System is statutorily prohibited from offering employer-sponsored health insurance to student help employees. To ensure student help employees are not “full-time” under the ACA, institutions must (1) limit use of lump sum payments and (2) cap hours of service.

UW System Administrative Policy 1237 (formerly GEN 20): Student Employment was implemented and limits student help hours worked to 25 hours per week. Under the policy, students may, however, work up to 40 hours per week during weeks when class is not in session providing it is also permitted by the individual institution. Federal Work-Study hours, including the institution match, will not count towards the hours evaluated to determine a full-time employee for purposes of the ACA. 

A temporary exception to both lump sum payments and the cap on hours is being granted for Resident Assistant/Resident Advisors/Resident Counselors. Student employees in this classification are allowed to be paid on a lump sum and work over 25 hours per week until further clarification is provided, but will be moved to a separate job code and actual hours must be tracked and reported at the time of a lump sum payment.

Hours worked as a graduate assistant will not count towards the student help hour cap.

For student help, the hours worked in that classification that are not in a job funded by federal work study dollars need to be capped at 25, even if the risk is reduced by the employee being dually employed in a benefits eligible position.  

When an individual is expected to respond to a call at a particular location (specific geographical point) within a timeframe of 15 minutes, or less, from the call, any hours holding the phone or being on-call would be tracked. If the expectation is not that a specific person, but rather a group, be responsible for answering any/all calls during a period of time, then the time may not be on-call (ie: sleeping). Any time responding to calls would be work time in this situation.

All Student Help must meet the definition of a variable hour employee. If, based on the facts and circumstances on the date an employee begins working (the start date), an employer cannot determine if the employee will be reasonably expected to work on average at least 30 hours per week, then that employee is considered a variable hour employee. Variable hour employees are subject to the measurement periods for purposes of the ACA. A variable hour employee may not have more than 1560 hours in a rolling year or work more than 130 hours/month for a period equal to or greater than 3 consecutive months or 12 weeks. To facilitate this, we have stated that student help employees cannot work more than 25 hours a week when class is in session and cannot work over 30 hours a week for more than 11 consecutive weeks. If the employee works more than 30 hours a week for 12 weeks, or more, they could be considered a full-time employee, not a variable hour employee. If the student works more than 40 hours per week during breaks, it may reduce the number of hours they can work over the course of the rest of the year to make certain they don’t go over 1,560 in any given measurement period. The 12-week limit is in place to ensure that these employees are not viewed as full-time under the ACA. If they are viewed as full-time under the ACA, then, we have an obligation to offer them health insurance no later than the 1st of the fourth month following full-time employment or change in job expectation. Since we are prohibited from offering them health insurance under state statute, this would be problematic.

Review the Hours Worked per Month Illustration available on the ACA Administrator web page. The illustration will provide insight into limits through the academic year and how to calculate hours through the measurement periods for determination of employee reporting during the stability period.  

The “Agreement and Verification of Hours of Work for Student Employment” form has been drafted to make sure the student understands the limitation on hours.

Actual hours worked need to be tracked, including on call hours. The time and labor entry needs to be a true and accurate reflection of on-call and hours worked that are required for ACA tracking and reporting.

When an individual SH Res Assistant is expected to respond to a call or remain within a restrictive distance from the dorm (i.e. may not leave campus) to be available at a particular location (specific geographical point) within a timeframe of 15 minutes, or less, any hours where the restriction is in place would be tracked. If the expectation is not that a specific person, but rather a group, be responsible for answering any/all calls during a period of time, then the time may not be on-call (ie: sleeping). Any time responding to calls would be work time in this situation.

Lump Sum Payments

The UW System must credit reasonable and realistic hours of service. Efforts must be made to curtail any practice of paying individuals solely on a lump sum basis. Individuals should be paid on an hourly basis with specific hours of service tracked.

Employees paid on a lump sum basis are considered non-hourly employees for purposes of the ACA. Tracking of actual hours worked is required for all lump sum payments, regardless of benefit eligibility status. Individuals who continue to receive payment on a lump sum basis are required to report hours of service spent earning the lump sum amount, or a days-worked equivalency method will be applied crediting eight hours of service for each business day within an earnings period. Effective January 1, 2016, institutions must track hours worked for all lump sum payments. 

Time reporting code (TRC) of ACAHW must be used for employees who are being paid via a lump sum, to record hours worked. Hours worked reporting is required for ACA for the following lump sum earnings codes:

a)      LWR - FA/AS/LI Lump Pmt

b)      LW9 - FA/AS/LI Lump Pmt IC 19

c)      HLP - University Staff Lump Pmt

d)      HL8 - University Staff Lump Pmt IC 18

e)      SLP - Student Hourly Lump Pmt (Including SL1, SL2, SL3)

Employees paid by agreement with no reported credited hours of service in a look-back measurement period will be reported using the days worked equivalency based on the earnings beginning and end dates for purposes of the ACA. 

For example, if a student is hired for a specific project and is given one week to complete the project, the earnings date would be one week (e.g., August 1 through 7). Using a days-worked equivalency method, that student-employee would then be credited with 40 hours of service. 

Lump sum payments for a bonus or award using the designated earnings codes shall have hours of 0.25 recorded for each payment as to not overstate hours worked. 

Note: The UW System does not use the safe harbor allowed under ACA to credit hours of service for adjunct professions/instructions paid on a lump sum basis.

Lump sum payments for an award or bonus using the designated earnings codes shall have hours of 0.25 recorded for each payment as to not overstate hours worked. 

  • LWR - FA/AS/LI Lump Pmt
  • LW9 - FA/AS/LI Lump Pmt IC 19
  • HLP - University Staff Lump Pmt
  • HL8 - University Staff Lump Pmt IC 18
  • SLP - Student Hourly Lump Pmt (Including SL1, SL2, SL3)

Glossary of Terms

Employees who meet the criteria established by the ACA will be treated as full-time employees solely for ACA reporting purposes and the Employer Mandate during the stability period.

There are three affordability “safe harbors” that will allow you to determine if the cost of your group health plan is affordable. Details of the three safe harbors are included in Q-F13 under the ACA Tax Forms section of this FAQ.

One of the most common terms used to refer to two separate pieces of legislation signed into law by President Barack Obama on March 23, 2010. The two pieces of legislation were the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010.

Employers subject to the employer shared responsibility provisions of the ACA.

Employees eligible for the Wisconsin Retirement System (WRS) benefits package or Graduate Assistant / Short-Term Academic Staff benefits package based on their employment at the UW System. For more information review the General Employee Information page at www.wisconsin.edu/ohrwd/benefits/general-employee-info/.

The ACA requires nearly everyone to have health insurance that meets minimum standards. Those that do not maintain health insurance coverage will pay a penalty starting in 2014. Effective January 1, 2019 the Individual Mandate penalty has been reduced to $0.

A 12-month period starting the first of the month following a variable hour or seasonal employee’s date of hire in which all hours of service are averaged to determine the employee’s full-time or part-time status under ACA for the corresponding 12-month stability period.

MEC is generally any type of employer-sponsored health coverage, certain types of governmental coverage such as Medicare or Medicaid, and other types of health coverage specifically identified by the Department of Health and Human Services.

Minimum value is provided by the plan if it pays at least 60% of the costs of benefits and provides inpatient hospitalization services and physician services.

An employee who is hired into a position for which the “customary” annual employment is six months or less. Customary means that by the nature of the position an employee typically works for a period of six months or less, and that period should begin each calendar year in approximately the same part of the year, such as summer or winter. Seasonal employees are subject to the measurement periods for purposes of ACA.

The 12-month period following a measurement period in which an employee’s status as full-time or non-full-time under ACA is effectively “locked in.”

The 12-month period in which the hours of ongoing employees are averaged to determine their full-time or part-time status under the ACA for the corresponding 12-month stability period. This period begins on October 1st and ends on September 30th of the following year.

For purposes of the employer mandate, an employee is a variable hour employee if, based on the facts and circumstances at the date the employee begins providing services to the employer (the start date), it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week.