ACA and COBRA Coverage

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.