Decoding “Qualifying Offer Method” from Line 22 (on Form 1094-C)

Form 1094-C is the transmittal form that is sent to the IRS along with a firm’s Form 1095-Cs. It has been compared to a FAX cover sheet. A FAX cover sheet for those too young to remember was used to identify the person who was to receive the information. The cover sheet often gave a brief overview of any pages that were included as a part of the FAX transmission as well as the number of pages that were being sent.

Simply put, the Form 1094-C is far more complicated than a FAX cover sheet ever was!

In fact, one line on the form would benefit from another even more historically remote object – a decoder ring! Line 22 certifies for employers, where applicable, that they are eligible for up to four (4) kinds of relief. It’s important to note that an employer doesn’t have to claim any of these options.

The options on line 22 are:

  1. Qualifying Offer Method
  2. Qualifying Offer Method Transition Relief
  3. Section 4980H Transition Relief
  4. 98% Offer Method.

You can’t complete line 22 of Form 1094-C unless you decode the options listed as “certifications of eligibility.” Here’s the scoop on Option A.

Option A, the Qualifying Offer Method, is hard to qualify for. It requires that:

  • A plan that meets MEC and MV is offered to one or more full-time employees for all months of the year
  • Employee cost of less than 9.5% of the single federal poverty line; approximately $90 per month for employee only coverage
  • MEC is offered to spouse and dependents.

What’s the payoff for offering this generous coverage? An employer that meets these requirements can provide a generic “alternative statement” to full-time employees in lieu of the 1095-C. And, the employer can provide a code in lieu of the cost of coverage information on line 15 of Form 1095-C.

What’s the catch? There are several.

The “alternative statement” is not available for a self-insured plan. The employer still has to file the 1095-C with the IRS. The generic form should be reviewed by legal counsel to ensure that it meets the requirements. Employees will compare their form with what their friends from other companies receive and ask a slew of questions.

Here’s what the IRS offers in an FAQ on employer reporting: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Reporting-of-Offers-of-Health-Insurance-Coverage-by-Employers-Section-6056#Methods%20of%20Reporting.