ACA reporting can be very complex, but if you can use the Qualifying Offer Method then it may be a lot simpler!
What is a Qualifying Offer?
A Qualifying Offer is an offer that meets the following criteria:
- It’s an offer of of Minimum Essential Coverage (MEC).
- It’s an offer that provides Minimum Value (MV).
- The employee cost for employee-only coverage should not exceed 9.5% (as adjusted annually) of the single mainland federal poverty line (FPL).
- The offer of coverage is also made to the employee’s spouses and dependents, if applicable.
What is the Qualifying Offer Method?
If the employer reports using the Qualifying Offer method, then they can use an alternative method of completing Form 1095-C and may use an simplified alternative statement when furnishing employee forms.
Alternative Method for Completing Form 1095-C under the Qualifying Offer Method
If the employer chooses to use this method, then they must:
- Check the box ‘A. Qualifying Offer Method’ on Line 22 of the Form 1094-C.
- Use the Form 1095-C Code, 1A – Qualifying Offer, in Line 14 for any month in which a Qualifying Offer was made.
- Leave Form 1095-C Line 15 blank for any month in which 1A is used in Line 14.
- The employer may also use an applicable code on Form 1095-C Line 16, but it is not required.
Simplified Alternative Statement
Employers that use the Qualifying Offer Method may choose to furnish an alternative simplified statement to each employee that:
- Received a Qualifying Offer for all 12 months of the calendar year, and
- Did not enroll in an employer-sponsored, self-insured coverage.
It’s important to note that employers that sponsor self-insured plans may not use the simplified statement for employees that have enrolled in the coverage. Employers are required to report that coverage using Form 1095-C, Part IV – Covered Individuals.
For the applicable employees, employers will meet the Form 1095-C furnishing requirements if it furnishes the employee a statement with the following information:
- Employer name, address and EIN.
- Contact name and telephone number. This should be someone that the employee can call should they have any questions regarding their offer of coverage or Form 1095-C information.
- Explanation that, for all 12 months of the year, the employee and their spouse and dependents, if any, received a Qualifying Offer and therefore are not eligible for a premium tax credit.
- Finally, the statement must direct employees to see Publication 974 for more info regarding premium tax credit eligibility.
Employers are not required to use this method, even if they are allowed to do so. Instead, they may furnish a copy of Form 1095-C if they choose.
Who can use the Qualifying Offer Method?
To be able to use the Qualifying Offer Method, Applicable Large Employers (or ALE Members) must certify that they made a Qualifying Offer to one or more of its full-time employees for all months during the year in which the employee was a full-time employee.
Employers may choose to use this method to cut down on reporting time, as it is can be a lot simpler.
The Qualifying Offer Method was created to simplify the ACA reporting process by allowing employers that offer exceptionally affordable coverage to shortcut some of the ACA reporting requirements.
Review our Essential Guide: Mastering Form 1095-C to learn more about Form 1095-C or download our Understanding Form 1095-C guide PDF below.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.