What is the number that goes on Line 15 of Form 1095-C?

Calculating the 'Employee Required Contribution' for an ICHRA program tax reporting.

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Updated over a week ago

Applicable Large Employers (ALEs) are subject to the employer shared responsibility provisions of the Affordable Care Act - also known as the "employer mandate." Per the mandate, the ALE must either offer minimum essential coverage that is “affordable” to their full-time employees or make an employer shared responsibility payment (ESRP) to the IRS.

What is an "Affordable" offer of coverage?

In general - whether offered health insurance coverage via a traditional group plan or an ICHRA - measuring the affordability of the offer of coverage is based on a measure of the monthly employee contribution (i.e., the employee's share of the insurance premium) vs. the employee's income.

While the specific numbers vary year-to-year, the rules essentially indicate that people shouldn't have to spend more than ~9% of income on health insurance premiums.

What is the Employee Required Contribution on Line 15?

Line 15 of Form 1095-C captures the monthly Employee Required Contribution for self-only (or employee-only) coverage.

For an ICHRA program, calculating the monthly Employee Required Contribution for Line 15 is a bit more complex than with a traditional group health plan. This is because health insurance premiums in the individual market tend to vary by geography and age. Don't worry - Take Command has the market data and is here to help!

The simple formula for calculating the amount to enter on Line 15 is below:

Employee Required Contribution = LCSP Premium - ICHRA Allowance

LCSP = Lowest-cost silver plan an employee could purchase on the marketplace

ICHRA Allowance = Amount of $$ employer offering per month via ICHRA program

To calculate the LCSP premium, we need to look at geographic location (either the employee's address or employer's work-site location) and the employee's age.

Can you provide an example calculation?

Here you go:

  • John Doe works for Acme Corporation, an ALE per IRS definition

  • John Doe receives an ICHRA offer of $500 / month

  • John is 40 years old and based on where he lives, the premium for the lowest-cost silver plan (LCSP) available on the marketplace is $650 / month

  • John receives a 1095-C from his employer at the end of the year with $150 / month noted as the Employee Required Contribution on Line 15

    • LCSP = $650

    • ICHRA Allowance = $500 (i.e., employer's contribution)

    • Employee Required Contribution = $650 - $500 = $150

Note: For IRS reporting purposes, it does not matter what health insurance plan John Doe actually enrolled in and the premium $$ amount. All that matters for affordability purposes is the premium of the LCSP.

Can you provide additional resources?

For more on the topic of affordability and ICHRA:

As a reminder, Take Command Health is not a licensed tax preparer. Please consult a tax professional or attorney if you have questions.

What if the offer of coverage is not considered affordable?

For employees not provided an affordable offer, they can decline the ICHRA allowance. If they wish, they can choose to go on the public marketplace and enroll in an individual health plan while receiving government-funded subsidies (premium tax credits) to help pay for coverage.

In these situations, (1) If the coverage offer was unaffordable and (2) The employee received premium tax credits to help pay for their individual plan premium, the employer is subject to an ESRP (“Part B Penalty”) on a per employee basis.

For 2022: the amount is $4,120 / year or $343.33 / month

For 2023: the amount is $4,320 / year or $360.00 / month

For 2024: the amount is $4,460 / year or $371.67 / month

Note: While following the requirements of the employer mandate when offering an ICHRA are recommended, there are situations where an employer finds making an ESRP can be more cost-effective, without harming an employees’ opportunity to gain health insurance at an affordable rate on the public insurance marketplace.

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