IRS Proposes Extension of ACA Reporting Deadlines, But This Time, It’s Permanent
On November 22, 2021, the IRS issued proposed regulations that, if finalized (which we expect will happen), will permanently extend the deadline to furnish Forms 1095-C and 1095-B to individuals, and, in limited circumstances, provide an alternative method of furnishing these forms to individuals. In addition, the IRS reiterated its position that 2020 will be the last year of good-faith reporting relief with respect to ACA reporting. See our previous client alert here.
The proposed regulations also provide that Medicaid coverage limited to COVID-19 testing and diagnostic services is not “minimum essential coverage” under the ACA. The proposed regulations generally apply for calendar years beginning after December 31, 2021, and taxpayers may rely on the proposed regulations for calendar years beginning after December 31, 2020.
Deadline to Furnish Forms 1095-C and 1095-B to Individuals
The proposed regulations provide an automatic 30-day extension for reporting entities to furnish Forms 1095-C and 1095-B to individuals, which generally means that the January 31 deadline will be extended to March 2 (or the next business day if this date falls on a weekend or legal holiday). The proposed regulations do not extend the deadline to file Forms 1095-C and 1095-B with the IRS. Reporting entities generally must file these forms with the IRS (along with the applicable transmittal statement) by February 28 (if filed on paper) or March 31 (if filed electronically). (Reporting entities may, however, request individual extensions to file these forms with the IRS.)
Alternative Method of Furnishing Forms 1095-C and 1095-B to Individuals
The proposed regulations provide that 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.
For insurers and “non-large” employers (generally, employers with fewer than 50 full-time employees) that sponsor self-funded group health 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 the following requirements:
- The entity posts a “clear and conspicuous notice” on the entity’s website stating that individuals may receive a copy of their 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 proposed regulations contain an example showing how an entity can provide a “clear and conspicuous notice.” The entity must also retain the notice on its website until October 15 of the year following the calendar year to which the form relates. For example, for the 2021 reporting year, the notice must stay on the entity’s website until October 15, 2022.
- The entity furnishes the individual with his or her Form 1095-B within 30 days of the date that the entity receives the request.
The proposed regulations generally do not extend this relief to “applicable large employers” (generally, employers with 50 or more full-time employees) that are subject to the ACA’s employer shared responsibility payment (i.e., the “pay or play” penalty) and sponsor self-funded group health plans. There is an exception for Forms 1095-C that are prepared on behalf of part-time employees and non-employees enrolled in the employer’s self-funded group health plan (such as former employees enrolled in the self-funded group health plan under COBRA or retiree coverage). With respect to these individuals, the employer would not be required to furnish Form 1095-C to these employees if the employer complies with the requirements listed above (i.e., the employer posts a “clear and conspicuous notice” on the employer’s website that the Form 1095-C is available upon request, retains the notice on its website until October 15 of the year following the calendar year to which the form relates, and furnishes the Form 1095-C within 30 days upon request). Notably, the relief does not apply with respect to the employer’s full-time employees.
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. In Notice 2020-76, the IRS indicated 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.) The IRS has extended the good-faith reporting relief every year since 2015. However, in the proposed regulations, the IRS reiterated its position that the extension for 2020 will be the final extension of the good-faith reporting relief, but entities may still be able to avoid penalties if the entities can show that they had reasonable cause for the failures.
Medicaid Coverage of COVID-19 Testing and Diagnostic Services
The proposed regulations provide that Medicaid coverage limited to COVID-19 testing and diagnostic services is not “minimum essential coverage” under the ACA. As a result, this coverage will not prevent an otherwise eligible individual from qualifying for the premium tax credit if the individual enrolls in coverage through the ACA Marketplace.
The proposed permanent extension of the deadline to furnish Forms 1095-C and 1095-B to individuals is likely welcome news to employers and insurers. In addition, the proposed alternative method of furnishing these forms to individuals is also welcome news, but it’s probably only meaningful to insurers. Finally, employers and insurers should exercise care when preparing Forms 1095-C and 1095-B for the 2021 reporting year and in future years due to the IRS’s statement that 2020 will be the last year for good-faith reporting relief.
If you have any questions about ACA reporting, please contact one of the authors or another one of the Miller Johnson employee benefits attorneys.