Congress Eases Affordable Care Act Reporting Requirements
On December 23, 2024, President Biden signed into law two pieces of legislation that change the Affordable Care Act’s (ACA) reporting and enforcement rules. Under the Paperwork Burden Reduction Act (PBRA), applicable large employers (ALEs) under the ACA generally are no longer required to furnish Forms 1095-C to all full-time employees, except upon the employee’s request.
In addition, the Employer Reporting Improvement Act (ERIA) creates a six-year statute of limitations for the ACA employer shared responsibility penalty (the ACA “pay or play” penalty), extends the time employers have to respond to proposed ACA pay or play penalties to 90 days, and permits electronic delivery of Forms 1095-C to employees, among other changes.
Background
Under the ACA, employers originally were required to report the health coverage provided to their employees to the IRS, and provide the employees with a copy of the report. Although the ACA individual mandate penalty was reduced from $695 (or 2.5% of income) to $0 (effectively eliminating the individual mandate), employers were still required to report health coverage information to full-time employees. In addition, the ACA pay or play penalty still applies to ALEs that fail to provide qualifying health coverage. Failure to provide qualifying health coverage may result in an ALE receiving an IRS Letter 226-J with a proposed penalty.
Under Section 6056 of the Internal Revenue Code (the “Code”), ALEs must annually report to the IRS via Forms 1094-C and 1095-C whether they provide ACA-compliant coverage (i.e., minimum essential coverage that is affordable and provides minimum value) for their full-time employees. Section 6056 of the Code also required ALEs to provide each full-time employee with a copy of Form 1095-C. Generally, the due date to provide the forms to individuals was January 31 of the calendar year immediately following the year in which coverage was provided. However, in 2022 final regulations, the IRS granted a permanent extension of the deadline to March 2 (or the next business day if this date falls on a weekend or legal holiday). See our client alert addressing the permanent extension here.
Paperwork Burden Reduction Act
Under the PBRA, ALEs generally will no longer be required to distribute Forms 1095-C to employees, unless the employees affirmatively request them. Instead, ALEs will only be required to prepare Forms 1095-C, file them with the IRS, and provide employees “clear, conspicuous, and accessible” notice of the employees’ ability to request the Forms 1095-C. When employees request the Forms, the employer must provide the Forms by the later of: (1) 30 days of the request; or (2) January 31 of the year following the calendar year of the applicable report year.
Employer Reporting Improvement Act
As discussed above, the PBRA permits Form 1095-C to be sent to an employee only upon the employee’s request. Additionally, now, the ERIA permits employers to electronically deliver Forms 1095-C. However, to electronically deliver the form, the employee must have previously affirmatively consented to electronic delivery and not have revoked such consent.
Notably, the ERIA amends Section 6501 of the Code to create a six-year statute of limitations that applies to the IRS assessing and collecting ACA pay or play penalties. Previously, the IRS stated that no statute of limitations applied to collecting ACA pay or play penalties. Now, the ERIA provides that the statute of limitations will begin to run on the due date for filing the requisite return under Section 6056 of the Code (i.e., the Forms 1095-C) or, if later, the date such return was actually filed. The ERIA also provides that employers will now have at least 90 days (instead of only 30 days) to respond from the date of the first letter (the IRS Letter 226-J) informing the employer of a proposed assessment of the ACA pay or play penalty. This will be helpful because the IRS Letter 226-J frequently didn’t make it to the appropriate individual within the organization (especially large organizations) until shortly before (or sometimes, after) the 30-day response deadline.
Finally, to simplify reporting, the ERIA provides relief if an employer does not have access to an individual’s taxpayer identification number (“TIN”)—typically, the individual’s Social Security Number. In such instances, the ERIA instead allows the employer to substitute the individual’s date of birth for the individual’s TIN on the Forms 1095-C, without soliciting the individual’s TIN several times before using the individual’s date of birth on the Forms.
Impact on 2024 ACA Reporting (Due in 2025)
To switch from automatically sending a copy of Forms 1095-C to employees, employers must provide proper notice to employees informing them of their right to request a copy of the Form 1095-C. If an employee requests a Form 1095-C, the employer may still avoid sending a paper copy if the individual has previously consented to an electronic delivery method and has not affirmatively opted out. The employer must provide a copy within 30 days of the request or by January 31 of the year following the applicable calendar year, whichever is later.
Please contact Tripp W. VanderWal, Brett N. Liefbroer, Nate Caverly, or any of the other attorneys in Miller Johnson’s Employee Benefits and Executive Compensation practice group if you have any questions about this client alert, ACA reporting, or the ACA pay or play penalties.