For employers subject to the Affordable Care Act (ACA), completing Form 1095-C accurately is crucial to maintaining compliance and avoiding costly penalties. At the heart of the form are Series 1 and Series 2 codes, which provide the IRS with essential details about the health insurance coverage offered to employees.
Here’s everything you need to know about ACA codes for Form 1095-C and how to use them correctly.
What Is Form 1095-C?
Form 1095-C is used by Applicable Large Employers (ALEs) to report health insurance coverage offered to their full-time employees. It consists of three main sections:
- Part I: Employee and employer details.
- Part II: Information about the type of health coverage offered.
- Part III: Details about self-insured coverage, if applicable.
Series 1 and Series 2 codes are entered in Part II and are critical for explaining the coverage offered, whether it met ACA requirements, and whether the employee was eligible for subsidies on the Health Insurance Marketplace.
Using the Codes Together
The codes in Lines 14 and 16 must align to tell a complete story of the coverage offered to an employee and the employer’s compliance with ACA regulations. For example:
- If an employer offers MEC providing MV to an employee (Code 1E) and the employee enrolls in the coverage, Line 16 would include Code 2C.
- If the employee was in a waiting period, Line 14 might include Code 1H (no offer), while Line 16 would include Code 2D (limited non-assessment period).
Common Mistakes to Avoid
- Misaligned Codes: Ensure the Series 1 and Series 2 codes complement each other. Inconsistent or incorrect codes can trigger penalties.
- Incorrect Use of Code 1H: Only use Code 1H if no offer of coverage was made. Misusing this code could misrepresent compliance.
- Failure to Document Safe Harbors: If affordability safe harbors apply, include the appropriate Series 2 code to avoid unnecessary penalties.
- Overlooking Non-Full-Time Employees: Don’t forget to include non-full-time employees who were offered coverage, as required for certain ALEs.
Accurately completing Form 1095-C with the correct Series 1 and Series 2 codes is essential for demonstrating compliance with the ACA. Missteps can lead to penalties, IRS inquiries, and increased administrative burden.
How ACA Track Can Help
At ACA Track, we eliminate the guesswork. Our comprehensive ACA compliance platform:
✅ Automates Code Selection
We analyze your employee data and generate the correct Series 1 and Series 2 codes for each employee, ensuring accuracy every time.
✅ Reduces Errors and Penalties
Our software flags inconsistencies and alerts you to potential issues, helping you avoid costly penalties before filing.
✅ Handles Safe Harbors
Whether you’re using the W-2, rate of pay, or federal poverty line safe harbor, we’ll ensure the appropriate codes are applied to demonstrate compliance.
Why Accuracy Matters
Failing to use the correct ACA codes can lead to:
- IRS Penalties: Incorrect reporting can result in fines of up to $310 per form in 2024.
- Increased Scrutiny: Missteps could trigger an IRS audit, requiring extensive documentation and explanations.
- Unnecessary Stress: Manual processes leave room for error, creating more work for your team.
With ACA Track, you don’t have to worry about these risks. We’ve helped thousands of clients simplify their ACA reporting and stay compliant—saving time, money, and peace of mind.
How to Get Started
Streamline your ACA reporting and protect your business from penalties with ACA Track.
Visit our website: www.aca-track.com
Try our FREE Full-Time Equivalent Calculator: FTE Calculator
Schedule a demo today and see how ACA Track can transform your compliance process.
