IRS Delays ACA Reporting Again, Announces Final Extension of Good-Faith Reporting Relief
On October 2, 2020, the IRS released Notice 2020-76, which—not surprisingly—extends both: (1) the deadline to furnish Forms 1095-C and 1095-B to individuals; and (2) the good-faith reporting relief. What may come as a surprise to some, the IRS announced that this extension will be the final extension of the good-faith reporting relief. In addition, in limited circumstances, the IRS will continue to not penalize entities for the failure to furnish information to individuals using Form 1095-B, and in some cases, Form 1095-C (see discussion of Section 6055 relief below).
Notice 2020-76 extends the due date for reporting entities to furnish 2020 Forms 1095-C and 1095-B to individuals from January 31, 2021 to March 2, 2021. These forms must also be filed with the IRS (along with the applicable transmittal statement) by March 1, 2021 (if filed on paper) or March 31, 2021 (if filed electronically). (Reporting entities may, however, request individual extensions to file these forms with the IRS.)
Good-Faith Reporting Relief
The IRS may impose penalties of up to $280 per form for failing to furnish an accurate Form 1095-C or 1095-B to an individual and $280 per form for failing to file an accurate Form 1095-C or 1095-B with the IRS. As in prior years, the IRS indicated in Notice 2020-76 that it would not impose these penalties for incomplete or inaccurate forms for the 2020 calendar year (due in 2021), if the reporting entity can show that it “made good-faith efforts to comply with the information-reporting requirements.” (This good-faith reporting relief does not apply to forms that were not timely furnished to individuals or filed with the IRS.) However, the IRS announced in Notice 2020-76 that this extension will be the final extension of the good-faith reporting relief.
Section 6055 Relief
Under Section 6055 of the Internal Revenue Code (the “Code”), providers of minimum essential coverage (insurers of fully insured plans and plan sponsors of self-funded plans) must furnish certain information to “responsible individuals” about enrollment in the provider’s minimum essential coverage during the previous calendar year. The purpose of this reporting requirement is to assist the IRS enforce compliance with the “individual mandate” penalty under the ACA (i.e., the requirement that most individuals be enrolled in minimum essential coverage or pay a penalty).
Under the Tax Cuts and Jobs Act of 2017, the individual mandate penalty was not repealed, but the penalty amount was reduced to zero. Practically speaking, this makes reporting under Section 6055 of the Code irrelevant. As a result, Notice 2020-76 provides limited relief from the reporting requirements under Section 6055 of the Code.
Here is a brief summary of the Section 6055 reporting requirements:
- Insurers. For employers that sponsor fully insured group health plans, the plan’s insurer must comply with the Section 6055 reporting requirements using Forms 1094-B and 1095-B.
- Self-Funded Plan Sponsors. For employers that sponsor self-funded plans, the employer must comply with the Section 6055 reporting requirements. But, the applicable forms depend on whether or not the employer is an “applicable large employer” that is subject to the Employer Shared Responsibility Payment (i.e., the “pay or play” penalty):
- Small Employers. Employers that are not subject to the pay or play penalty use Forms 1094-B and 1095-B. (Employers that are not subject to the pay or play penalty generally don’t have enough employees to sponsor a self-funded plan. So, it is rare for employers to file Forms 1094-B and 1095-B.)
- Large Employers. Employers that are subject to the pay or play penalty generally use Forms 1094-C and 1095-C. (Forms 1094-C and 1095-C allow the employer to comply with its reporting obligations under both Sections 6055 and 6056 of the Code. Under Section 6056 of the Code, employers must report compliance with the pay or play penalty.)
Notice 2020-76 provides relief with respect to Forms 1095-B and limited relief with respect to Forms 1095-C. For insurers and employers that sponsor self-funded plans, the entity must still prepare and file the Forms 1095-B with the IRS. However, these entities are not required to furnish individuals with a copy of the Form 1095-B as long as the entity satisfies both of the following requirements:
- The entity prominently posts a notice on its website stating that individuals may receive a copy of their Form 1095-B upon request. The notice must contain both an email and a physical address that individuals can use to request their Form 1095-B, and a telephone number that individuals can use to contact the entity with questions.
- The entity furnishes the individual with his or her Form 1095-B within 30 days of the date that the entity receives the request.
Notice 2020-76 generally does not extend this relief to employers that are subject to the pay or play penalty and sponsor self-funded plans, except for Forms 1095-C that are prepared on behalf of individuals who are not full-time employees for the entire 2020 calendar year. For these individuals, the employer may file a Form 1095-C on behalf of an individual who was enrolled in the self-funded plan during the 2020 calendar year, but was not a full-time employee during any month of the calendar year. (For these individuals, the “all 12 months” column of line 14 is completed using the code “1G.”) Examples of where this relief may extend to Forms 1095-C are: (1) former employees who terminated employment before 2020 but were enrolled in the self-funded plan under COBRA or retiree coverage; and (2) employees who were part-time during all of 2020, but were enrolled in the self-funded plan because the plan sponsor extended eligibility for the self-funded plan to part-time employees.
While not surprising, the extension of the deadline to furnish Forms 1095-C and 1095-B to individuals and the extension of the good-faith reporting relief is likely welcome news to insurers and employers. But the IRS’s announcement that this extension of the good-faith reporting relief is the final extension is likely surprising. Finally, the extension of the Section 6055 reporting relief is also welcome news, but it’s probably only meaningful to insurers.
If you have any questions about ACA reporting, please contact the authors or one of the members of the Miller Johnson Employee Benefits Practice Group.