Dec 23, 2024
ACA Employer Reporting Changes
As mentioned in previously posted articles, two bills specific to the Affordable Care Act (ACA) employer reporting under §6055 and §6056 have been approved by Congress and are simply awaiting the President’s signature.
Amongst other things, the legislation allows employers to meet Form 1095 distribution requirements by posting a notice of availability and then only distributing upon request. In addition, for employers required to report self-funded group health plan coverage information for spouses and dependents, there is more flexibility to use the individual’s date of birth when the tax identification number (TIN) is not available. None of the changes significantly alter the existing employer reporting requirements, but the changes will provide employers with a little relief. The changes summarized below are effective for the current 2024 reporting year (for returns due early in 2025).
NOTE: The legislation only affects federal ACA employer reporting requirements. For employers subject to state-level reporting requirements in CA, MA, NJ, RI or DC, this relief, especially for distribution of the Form 1095s, may not be available for the 2024 reporting year.
Background - ACA Employer Reporting Responsibilities
All applicable large employers (ALEs) – 50 or more full-time equivalents (FTEs) - are required to report on offers of coverage to full-time employees. ALEs must report offer of coverage information using Forms 1094-C and 1095-C. In addition, any size employer who provided level-funded or self-funded group health plan coverage during 2024 must report coverage information for all individuals enrolled in the plan, including employees, non-employees (e.g., owners, retirees, COBRA participants), and their spouses and dependents. Small employers (<50 FTEs, non-ALEs) report this coverage information using Forms 1094-B and 1095-B. ALEs generally report this coverage information in Part III of Form 1095-C. The IRS instructions for 2024 reporting indicate Form 1095s must be distributed to full-time employees and covered individuals by March 3, 2025, and Form 1094 along with all Form 1095s must be submitted electronically to the IRS by March 31, 2025. Failure to report complete, accurate, timely information can result in significant reporting penalties up to $330/form.
H.R. 3801 – Employer Reporting Improvement Act
Flexibility in reporting TINs/SSNs for Covered Individuals of a Self-Funded Plan
In reporting coverage information for those who enrolled in a level-funded or self-funded group health plan, it was previously necessary to include the individual’s TIN/SSN unless reasonable cause was established, in which case a date of birth could then be used instead. To establish reasonable cause, the employer had to make at least 3 attempts to collect matching name and TIN/SSN information. Going forward, if the TIN/SSN is not available, the date of birth can be used without first having to establish reasonable cause. For employers who offer level-funded or self-funded coverage, collecting accurate TINs/SSNs has been an ongoing issue and creates lots of reporting errors. Being able to use a date of birth without having to first make 3 attempts to collect a matching name and TIN/SSN will certainly simplify reporting for covered spouses and dependents.
§4980H Enforcement Timelines Adjusted/Established
ALEs who receive a Letter 226J from the IRS proposing employer shared responsibility penalties must be given at least 90 (previously 30) days to respond before the IRS takes any further action. In addition, there will now be a 6-year statute of limitations on the IRS’ ability to impose such penalties; previously there wasn’t a formal statute of limitations. This will not impact IRS enforcement activity much as the IRS has been pretty flexible with employer responses so far but will provide some additional protection for employers going forward.
H.R. 3797 – Paperwork Burden Reduction Act
Easier Distribution of Form 1095s
For purposes of both §6055 and §6056 (both the “B” and “C” Form 1095s), rather than having to mail a copy or provide it electronically to all full-time employees and covered individuals, the distribution requirement can be satisfied by providing a “clear, conspicuous and accessible notice” that the forms are available upon request if such form is then provided by January 31st or within 30 days of request (whichever is later). Previously this was possible in some cases for the Form 1095-Bs, but not for the Form 1095-Cs.
Once the legislation is formally signed into law, the expectation is that the IRS will provide further guidance on what is needed to satisfy the notice requirement, but until then, it may be helpful to consider the guidance set forth in the 2024 IRS Instructions for 1094-B and 1095-B, pg. 5. The instructions indicate the notice of availability of the Form 1095s should be posted on the employer’s website (or perhaps a benefits portal) with an email address, physical mailing address, and telephone number that can be used to request a copy.
While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.
