We are an ALE and preparing our Forms 1095-C for the 2020 reporting year. Are there any special reporting codes or considerations for the months in which some employees were furloughed?

There are no codes specifically for furloughed employees. The answer depends upon whether the employer continued coverage during the furloughed period, whether the employee was enrolled in that coverage, the measurement method used by the employer, and the applicable affordability safe harbor, if any.

Furloughed employees who were still covered by the plan during a period of zero work hours would be reported as normal with the respective offer of coverage on Line 14 (for example 1E) and 2C (employee enrolled) on Line 16. Any employee who is enrolled in the employer’s coverage cannot trigger a penalty for the employer, regardless of the cost of coverage or affordability.

If an employer uses the monthly measurement method and the employee has a change of status from full-time to unpaid leave (a period of zero hours), the employee is no longer considered full-time at the end of the month in which the change occurs. A furloughed employee, under this method, who was still eligible for active coverage during the period of zero hours, but was not enrolled (due to a previous waiver), would not be reported as a full-time employee for the furloughed months. The employer would still report the offer of coverage on Line 14 and the employee’s required contribution on Line 15. Line 16 would indicate that the employee was not a full-time employee during the furloughed period (2B).

If an employer uses the look-back measurement method, an employee who has earned full-time status during an initial or standard measurement period is considered full-time during the entire stability period regardless of the number of hours worked (assuming there was not a termination of employment). A furloughed employee, under this method, who was still eligible for active coverage during the period of zero hours, but was not enrolled (due to a previous waiver), would be reported as a full-time employee for the furloughed months occurring during the stability period. The employer would report the applicable offer of coverage on Line 14 with the employee’s required contribution on Line 15. Line 16 would be the employer’s affordability safe harbor, if one applies. If none of the safe harbors apply, Line 16 would be left blank and would indicate potential risk under Penalty B for the employer.

As a reminder on the affordability safe harbors, if the employer is using:

• Rate of Pay, the code would be 2H on Line 16. The rate is affordable if it is not greater than 9.78% of the employee's monthly salary or 9.78% of the employee's hourly wage multiplied by 130 hours, regardless of how many hours are actually worked.
• Federal Poverty Level, the code is 2G. The employee's required contribution would have to be $101.79 or less per month. This is the only safe harbor that is not based on the employee’s specific earnings.
• Form W-2 safe harbor, the code is 2F. The employee’s cost of coverage is affordable if it is less than 9.78% of the employee's 2020 Form W-2 Box 1 earnings divided by 12. This will be the most difficult safe harbor to satisfy for furloughed employees. If the employee had a number of months with zero compensation, the cost of coverage very likely will not be affordable.

If an employee was terminated from the plan and offered COBRA, the coding is different based on whether the loss was triggered by termination of employment or reduction of hours. For termination of employment, the employee would be treated as any other terminated employee. COBRA coverage is not considered an offer of coverage for this purpose following a termination of employment. Line 14 would be 1H (no offer of coverage); Line 15 would be blank; and Line 16 would be 2A (not employed). If the employee was offered COBRA due to a reduction of hours, COBRA coverage would have to be reported as an offer of coverage. Please see IRS FAQ #23 for guidance on reporting this scenario.

Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C »