ACA and COBRA Coverage

Sovos
April 4, 2016

This blog was last updated on June 27, 2021

Every year there are a plethora of questions surrounding COBRA coverage. This year is no exception. COBRA is offered to employees who have recently been terminated, fired, or have seen a drastic reduction in hours that would make them ineligible for minimum essential coverage regularly offered by their employer. COBRA is complicated and when it comes to ACA reporting it’s no different. Many people are looking to the IRS to provide answers about how to report COBRA coverage as part of their ACA reporting obligations. Unfortunately, the IRS and many other agencies don’t have the information or answers people are looking for and need for this mandatory reporting requirement. However, don’t blame the IRS. They are not provided the necessary guidance in order to help the individuals who need it to compliantly report. For instance, about two months ago the IRS said they were working to revise the FAQs on reporting COBRA coverage and provide more guidance. However, about a month ago, they replaced some Cobra FAQs, which were critical on how to report under ACA and what codes should be used, saying they were being “revised”, but they haven’t been replaced yet and it is now the end of March and the guidance for reporting COBRA coverage is still pretty hazy. This proves that just like the public, the IRS has a very difficult time getting answers and clarification from other agencies and departments. Regardless of being provided a FAQ for guidance, people need to report COBRA coverage like any other health insurance coverage they have had over the year as part of ACA reporting. The codes required to be reported depend on the specific coverage offered and cost to the employee among other factors such as hours worked. Moreover, the instructions from the 1095-C Instructions guide is pretty vague and people often get confused by it: “An offer of COBRA continuation coverage that is made to an active employee (for instance, an offer of COBRA continuation coverage that is made due to a reduction in the employee’s hours that resulted in the employee no longer being eligible for coverage under a plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.” Additionally, during the ACA Information Returns (AIR) working group meeting in December, there were four scenarios presented in the Employer Information Reporting COBRA update portion of the presentation. While these examples are useful, they are not widely available to the public and do not answer a lot of questions that many employers and employees still have in order to comply with 2015 (this is because this is for Tax year 2015, filing in calendar year 2016) mandatory ACA reporting. Penalties can be steep for non-compliance even during this good faith reporting year. While some inaccuracy in reporting will be tolerated, the IRS has made it clear all covered populations must be reported on—such as COBRA individuals. The ACA legislation is complex and still evolving. As changes and clarifications are issued, Sovos is here to provide you with updates so you can stay compliant with your ACA reporting. Our solution can help you with ACA compliance and we encourage you to sign up to our blog so you can stay in the know.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Sovos

Sovos is a global provider of tax, compliance and trust solutions and services that enable businesses to navigate an increasingly regulated world with true confidence. Purpose-built for always-on compliance capabilities, our scalable IT-driven solutions meet the demands of an evolving and complex global regulatory landscape. Sovos’ cloud-based software platform provides an unparalleled level of integration with business applications and government compliance processes. More than 100,000 customers in 100+ countries – including half the Fortune 500 – trust Sovos for their compliance needs. Sovos annually processes more than three billion transactions across 19,000 global tax jurisdictions. Bolstered by a robust partner program more than 400 strong, Sovos brings to bear an unrivaled global network for companies across industries and geographies. Founded in 1979, Sovos has operations across the Americas and Europe, and is owned by Hg and TA Associates.
Share this post

2025 tax filing season
North America Tax Information Reporting
November 21, 2024
Top 5 FAQs to Prepare for the 2025 Tax Filing Season

This blog was last updated on November 21, 2024 While “spooky season” may be over for most of us, the scariest time of year for many businesses is right around the corner: tax filing season. As they brace themselves for the flood of forms, regulatory updates, and tight deadlines, the fear of missing a critical […]

dtc shipping law updates
North America ShipCompliant
November 13, 2024
DtC Shipping Laws: Key Updates for Alcohol Shippers

This blog was last updated on November 13, 2024 When engaging in direct-to-consumer (DtC) shipping of alcohol, compliance with different state laws is paramount and so keeping up with law changes is critical. In 2024, the rules in several states for DtC have already been adjusted or will change soon. Here is a review of […]

sales tax vs. use taxes
North America Sales & Use Tax
November 8, 2024
Sales Tax vs. Use Tax, Explained. Who Reports What, and When?

This blog was last updated on November 19, 2024 One of the core concepts in sales tax compliance is also one of the most frequently misunderstood: the differences between sales tax and use tax. These tax types may look similar on the surface, but knowing the differences is essential for staying compliant and avoiding costly […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
2025 NAIC Bond Project – The Insurer’s Guide

This blog was last updated on November 14, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
VAT in the Digital Age Approved in ECOFIN

This blog was last updated on November 7, 2024 The long-awaited VAT in the Digital Age (ViDA) proposal has been approved by Member States’ Economic and Finance Ministers. On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed on adopting the ViDA package. This decision marks a major […]