An ALE Member making an offer of COBRA continuation coverage to an active employee who loses eligibility for non-COBRA coverage due to a reduction in hours (for instance, a change from full-time to part-time status resulting in loss of eligibility under the plan) should report the offer of COBRA continuation coverage as an offer of coverage in Part II of Form 1095-C. In this instance, the code entered on line 14 for the months in which an offer of COBRA continuation coverage is made should reflect only the individuals who received an offer of COBRA continuation coverage (which generally will be only the individuals enrolled in the non-COBRA coverage at the time of the reduction in hours) or the individuals who received an offer of other coverage at the same time the COBRA continuation coverage is offered. This is because only the individuals who received an offer of COBRA continuation coverage (or of other coverage at the same time) are potentially ineligible for the premium tax credit for coverage through the Marketplace due to the offer of COBRA continuation coverage (or other coverage).
For example, assume a full-time employee who has been offered spouse and dependent minimum value coverage elects self-only coverage as the original (non-COBRA) coverage. Further assume the employee becomes part-time and receives an offer of COBRA continuation coverage that provides minimum value, but neither the employee’s spouse nor dependents are offered COBRA continuation or other coverage at that time. In that case, the ALE Member should enter code 1B, Minimum essential coverage providing minimum value offered to employee only, on line 14 for each month for which the COBRA continuation coverage offer applies.
Notwithstanding the preceding instructions for completing line 14 of Form 1095-C, for purposes of section 4980H(a), an ALE Member will be treated as having made an offer to a full-time employee’s dependents (for purposes of section 4980H, a dependent does not include a spouse) for an entire plan year if the ALE Member provided the employee an effective opportunity to enroll the employee’s dependents at least once for the plan year, even if the employee declined to enroll the dependents in the coverage and, as a result, the dependents later did not receive an offer of COBRA coverage. This treatment of the initial offer as an offer of coverage to the dependents for purposes of section 4980H(a) would include the period after that employee had a reduction in hours, lost eligibility under the plan, and was offered self-only COBRA continuation coverage; however, this treatment applies only if the employer would also have offered the dependents COBRA continuation coverage if they had been enrolled in the plan at the time of the reduction in hours.
The following examples illustrate how employers should report offers of COBRA continuation coverage for active employees on Form 1095-C.
Example 1: ABC Corporation is an ALE Member, and its health plan has a calendar year plan year. James was a full-time employee of ABC Corporation and received an offer of coverage under its health plan, providing minimum value, including an offer of minimum essential coverage for his spouse and dependents. James enrolled in self-only coverage from January 1, 2018 through October 31, 2018. The employee required contribution for the lowest cost self-only coverage providing minimum value available under the plan was $150 per month. On November 1, 2018, James transferred to a part-time position and was no longer eligible for coverage under the terms of the ABC Corporation health plan. James received an offer of COBRA continuation coverage due to the transfer to the reduced-hours position, with an employee required contribution of $250 per month for self-only coverage providing minimum value. James elected to enroll in the COBRA continuation coverage for the months of November and December 2018.
ABC Corporation should complete Part II of Form 1095-C for James as follows:
January - October
Line 14 – Enter code 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse)
Line 15 – Enter $150 as the employee required contribution
Line 16 – Enter code 2C (Employee enrolled in coverage offered)
November – December
Line 14 – Enter code 1B (Minimum essential coverage providing minimum value offered to employee only)
Line 15 – Enter $250 as the employee required contribution
Line 16 – Enter code 2C (Employee enrolled in coverage offered)
Example 2: The same facts as Example 1, except James elects not to enroll in the COBRA continuation coverage. ABC Corporation should complete line 14 and line 15 in the same manner as in Example 1. However, the applicable code, if any, for line 16 for November and December is determined as it would be for any other active employee. Thus, for any month in which James is treated as a full-time employee under the look-back measurement method, the employer may not use code 2B, Employee not a full-time employee, on line 16. In that case, the employer may enter another code from Code Series 2 (Section 4980H Safe Harbor and Other Relief), if applicable. For guidance on how to determine who is a full-time employee, see Identification of Full-Time Employees section in the Employer Shared Responsibility Q&As.
ABC Corporation should complete Part II of Form 1095-C for James as follows:
January – October
Line 14 – Enter code 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse)
Line 15 – Enter $150 as the employee required contribution
Line 16 – Enter code 2C (Employee enrolled in coverage offered)
November – December
Line 14 – Enter code 1B (Minimum essential coverage providing minimum value offered to employee only)
Line 15 – Enter $250 as the employee required contribution
Line 16 – Enter, if applicable, a code from Code Series 2 (Section 4980H Safe Harbor Codes and Other Relief for Employers)
For Examples 1 and 2, when ABC Corporation completes its Authoritative Transmittal, Part III – ALE Member Information – Monthly, Lines 23-35, ABC Corporation can treat James and his dependents as if they had an offer of coverage for the whole 2018 plan year, including November and December, when determining whether ABC corporation offered minimum essential coverage to at least 95% of its full-time employees and their dependents.
Example 3: The same facts as Example 1, except from January 1, 2018, James enrolled in family coverage providing minimum value covering himself, his spouse, and his dependents. On November 1, 2018, when James transferred to a part-time position and lost eligibility for coverage under the terms of the plan, an offer of COBRA continuation coverage was made to James, his spouse, and his dependents. ABC Corporation should complete line 14 and line 15 in the same manner as in Example 1, except that for November and December, code 1E, Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse, should be entered on line 14.
ABC Corporation should complete Part II of Form 1095-C for James as follows:
January – October
Line 14 – Enter code 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse)
Line 15 – Enter $150 as the employee required contribution
Line 16 – Enter code 2C (Employee enrolled in coverage offered)
November – December
Line 14 – Enter code 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse)
Line 15 – Enter $250 as the employee required contribution
Line 16 – Enter code 2C (Employee enrolled in coverage offered)