By Rachel Graff, Digital Content Manager at Avionte
As year end reporting season approaches, here are some 2020 tax form updates to two major forms of which firms across the US and Canada should be aware.
1095-C updates for employers providing ICHRAs
In 2020, employers had a new option for providing health care to their employees: Individual Coverage Health Reimbursement Arrangements (ICHRAs). If you provided an ICHRA to employees, take note of these new instructions for the 1095-C.
Under the ACA, large employers are required to offer ACA-compliant coverage to their full-time employees or pay an employer shared responsibility payment penalty to the IRS. This requirement is commonly known as the employer mandate. Large employers are those with an average of at least 50 full-time employees (including full-time equivalent employees) in the prior calendar year. The employer’s health coverage is ACA-compliant if it meets minimum essential coverage, minimum value and affordability requirements.
The federal agencies have determined that ICHRAs meet the minimum essential coverage requirement and will meet the minimum value requirement if the ICHRA is affordable. In general, affordability is based on (1) an employee’s compensation, (2) the amount the employer contributes to the ICHRA, and (3) the premium for the lowest-cost silver health plan available to the employee on the Exchange taking into account the employee’s age and location (residence or primary worksite). The federal government has developed a tool employers can use to determine the lowest-cost silver plans in states using the federal Exchange. Consequently, a large employer may be able to meet the employer mandate by offering its employees an ICHRA rather than a traditional group health insurance plan.
Tax form updates for employers providing ICHRAs
Age: If the employee was offered an individual coverage HRA, enter the employee’s age on January 1, 2020. Note that for non-calendar year plans or for employees who become eligible during the plan year, this age may not be the Applicable age used to determine Employee Required Contribution.
Line 14: Codes 1L through 1S are available to indicate the affordability of ICHRAs offered by employers. They should be used under the following circumstances:
- 1L: If an ICHRA is offered to employees only and affordability is determined by a ZIP Code, which identifies an employee’s primary residence
- 1M: If an ICHRA is offered to employees and dependent(s) (not spouse) and affordability is determined by a ZIP Code, which identifies an employee’s primary residence
- 1N: If an ICHRA is offered to employees, spouses, and dependent(s) and affordability is determined by a ZIP Code, which identifies an employee’s primary residence
- 1O: If an ICHRA is offered to employees and affordability safe harbor is determined by the ZIP Code of the employment site
- 1P: If an ICHRA is offered to employees and dependent(s) (not spouse) and affordability safe harbor is determined by the ZIP Code of the employment site
- 1Q: If an ICHRA is offered to employees, spouses, and dependent(s) (not spouse) and affordability safe harbor is determined by the ZIP Code of the employment site
- 1R: If an ICHRA is not affordable and is offered to employees; employees and spouses or dependent(s), or employees, spouses, and dependents
- 1S: If an ICHRA was offered to a worker who isn’t a full-time employee
Line 17: If the ALE Member used code 1L, 1M, 1N, 1O, 1P, or 1Q because it offered the employee an individual coverage HRA, enter the appropriate ZIP code used for identifying the lowest cost silver plan used to calculate the Employee Required Contribution in line 15. This will be the ZIP code of the employee’s residence (code 1L, 1M, or 1N) or the ZIP code of the employee’s primary site of employment if the ALE Member uses the work location safe harbor (code 1O, 1P, or 1Q)
T4 CEWS data requirement updates for all Canadian employers
For the 2020 tax year, the Canada Revenue Agency (CRA) will be introducing additional reporting for the T4 slip, Statement of Remuneration Paid. Additional reporting requirements will apply to all employers, and will help the CRA validate payments under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Canada Emergency Student Benefit (CESB).
How to report employment income during COVID-19 pay periods
For the tax year 2020, in addition to reporting employment income in Box 14 or Code 71, you will use new “other information” codes when reporting employment income and retroactive payments in the following periods:
- Code 57: Employment income – March 15 to May 9
- Code 58: Employment income – May 10 to July 4
- Code 59: Employment income – July 5 to August 29
- Code 60: Employment income – August 30 to September 26
Eligibility criteria for the CERB, CEWS, and CESB is based on employment income for a defined period. The new requirement means employers should report income and any retroactive payments made during these periods.
COVID-19 & year-end resources
Refer to the Avionté Knowledge Base for our library of resources of updated information regarding COVID-19 & Year-End reporting. Also, each Monday the Compliance – Tip of the Week is sent to clients whom have signed up for the newsletter.
For more information, and before acting on any information contained within this article, Avionté recommends consulting with your legal counsel. This information should not be construed as, and does not constitute, legal advice.
Rachel Graff is an experienced speaker and educator. She has spent over five years as a technical trainer for Avionté Staffing Software and now contributes to the organization as a Digital Content Creator with the marketing team. Rachel organizes the programming for Avionté’s annual user conference, CONNECT, and has emceed the event for the last five years. She has a B,A, in Secondary Education from Iowa State University and is passionate about educating others and optimizing systems to improve efficiency.