As Form 1095-C distribution approaches, HR professionals are once again reviewing ACA reporting to ensure accuracy and consistency. While Line 14 identifies whether an offer of health coverage was made, Line 16 plays an equally important role by explaining ; an employer did or did not owe a penalty for a particular employee and month.
Together,Lines 14 and 16 tell the full ACA compliance story. An error on Line 16 can undermine otherwise correct reporting and may lead to IRS inquiries or penalty notices.
A quick refresher on Form 1095-C
Form 1095-C,Employer-Provided Health Insurance Offer and Coverage, is filed by ApplicableLarge Employers (ALEs), generally those with 50 or more full-time and full-time equivalent employees. Employers must furnish the form to full-time employees and submit it to the IRS.
The form reports:
- Whether health coverage was offered
- Whether that coverage met ACA standards
- The months during which coverage was available
- Information the IRS uses to assess employer shared responsibility compliance
The purpose of Line 16
Line 16provides context for the coverage information reported on Line 14. It explains whether the employer satisfied ACA requirements for a particular employee or whether a valid reason exists for not offering coverage during a given month.
Line 16 usesCode Series 2 to indicate circumstances such as:
- The employee enrolled in the coverage offered
- The coverage was affordable under an IRS safe harbor
- The employee was not full-time, was in a waiting period, or otherwise not eligible for an offer
- Another ACA rule or exemption applied
Without an accurate Line 16 code, the IRS may not be able to determine whether the employer avoided an ACA penalty, even if coverage was properly offered.
How Line 16 works with Line 14
Line 14 andLine 16 must be read together. Line 14 shows what was offered, while Line 16 shows how that offer fits into ACA requirements
For example:
- If Line 14 shows an offer of coverage, Line 16 often explains whether the employee enrolled or whether the offer met affordability standards.
- If Line 14 shows no offer of coverage, Line 16 may indicate that the employee was not full-time or was in a waiting period.
In consistent or incompatible codes between Lines 14 and 16 are a common source of reporting errors and IRS follow-up.
Understanding Line 16 codes at a high level
While theIRS provides detailed guidance for each Code Series 2 option, Line 16 codes generally fall into a few key categories:
- Enrollment codes, indicating the employee enrolled in coverage
- Affordability safe harbor codes, showing the employer met affordability requirements using an approved method
- Status-based codes, such as those used when an employee was not full-time, was in a waiting period, or was otherwise not required to receive an offer
- Other relief codes, reflecting specific ACA rules or exceptions
Each code communicates a specific compliance outcome, and selecting the wrong code can change how the IRS evaluates the employer’s obligation for that month.
Tips for accurate Line 16 reporting
To reduce errors and avoid penalties, employers should:
- Review employee status on a month-by-month basis, including full-time status and waiting periods
- Confirm affordability calculations and maintain documentation supporting any safe harbor used
- Apply safe harbor and relief codes consistently across similarly situated employees
- Ensure Line 16 codes logically align with the corresponding Line 14 codes
- Review IRS instructions carefully, especially when employee status changes mid-year
Why accuracy matters
The IRS no longer provides broad good-faith relief for ACA reporting errors. This makes accurate Line 16 coding more important than ever. Even small mistakes can trigger IRS notices, require time-consuming corrections, and create confusion for employees.
Taking the time to review Line 16 carefully helps ensure your Form 1095-C reporting accurately reflects your compliance efforts and reduces the risk of penalties.
How BAS can help
Employers that use BAS for ACA Data Collection and Reporting benefit from automated coding of Lines 14 and 16 based on collected eligibility, coverage, and affordability data. This helps ensure consistency, accuracy, and alignment across forms.
For more information about BAS’s ACA DataCollection and Reporting Service, contact your account manager or email solutions@basusa.com.
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This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.
