President Biden recently signed into law the Paperwork Burden Reduction Act and the Employer Reporting Improvement Act. These new laws make important changes to the Affordable Care Act (ACA). Among other things, the new laws simplify the rules for employers furnishing Forms 1095-C and 1095-B to individuals. This client alert describes these and other changes to the ACA.
Affordable Care Act Reporting
The ACA requires employers to furnish certain forms to individuals and to file certain forms with the IRS. The changes wrought by the new laws only apply to the requirements to furnish information to individuals. There are two such requirements:
- Applicable Large Employer (ALE) Reporting. An ALE must provide a Form 1095-C to any employee who was full-time for any month in 2024. This requirement applies to every ALE, no matter whether its plan is fully-insured or self-funded.
- Coverage Reporting. An employer offering a self-funded major medical plan must provide Form 1095-C or Form 1095-B to any individual who was covered by the self-funded plan in 2024. This requirement applies to all employers with a self-funded plan, no matter whether the employer is large or small.
How may these forms be provided to employees and individuals? What distribution methods are permitted?
First-Class Mail or In-Person Delivery. Employers have been and still are permitted to satisfy these reporting requirements by providing physical copies of the forms to individuals, either by first-class mail or by in-person delivery.
Electronic Delivery. Employers may provide the forms electronically (via email) if the individual consents. Previously, the consent had to be made in a manner that "reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished." Under the Employer Reporting Improvement Act, the "demonstration" is no longer necessary. Now, the affirmative consent must relate to the specific form (the 1095-C or 1095-B) and must be made during the year to which the statement relates. The new law is effective for forms that are required to be furnished after December 31, 2024.
Alternative Option. Instead of sending the applicable form directly to the individual, an employer may use the alternative option: the employer must post a notice on its website indicating that the form is available upon request and must actually make the form available within 30 days of the request (or January 31, if later). Previously, the IRS announced that it would not impose failure-to-furnish penalties if the employer complied with the alternative option. Now, the alternative option is formally codified. Previously, the alternative option only applied to Coverage Reporting. Now, the alternative option also applies to ALE Reporting. The new law is effective for forms relating to calendar year 2024 and later years.
The forms for 2024 must be furnished to individuals, by any one of these methods, no later than March 3, 2025.
Other Affordable Care Act Impacts
Coverage Reporting—Tax Identification Numbers (TINs). Coverage Reporting generally requires the employer to provide a TIN for each covered individual. If the employer is unable to obtain an individual's TIN, the Secretary may allow the employer to use the individual's full name and date of birth instead. This rule is effective for forms whose filing due date is after December 31, 2024.
Employer Penalties—Response Time. If the IRS believes that an ALE has failed to offer the right sort of coverage to the right number of full-time employees, the IRS may assess an Employer Shared Responsibility Payment (ESRP). This process begins when the IRS mails the ESRP assessment to the employer. Under the new laws, an ALE has at least 90 days from the date of the first assessment to respond to the IRS. This response time is effective for assessments imposed after December 31, 2024.
Employer Penalties—Statute of Limitations. Under the new laws, an ESRP cannot be assessed more than six years after the due date for filing ALE Reporting forms with the IRS (or, if later, the date the returns were actually filed). This statute of limitations is effective for ALE Reporting forms filed after December 31, 2024.
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If you have questions or concerns regarding this client alert, please contact the authors, any member of Venable's Employee Benefits and Executive Compensation Group, or your regular Venable lawyer.