President Biden signed two bills, Employer Reporting Improvement Act and the Paperwork Burden Reduction Act, into law which provide helpful updates to the Affordable Care Act’s (ACA) reporting requirements under Internal Revenue Code (IRC) Sections 6055 or 6056. The amendments are in effect for the 2024 reporting, which is due in early 2025.
Key Changes for Employers:
Electronic Statements and Furnishing 1095-B and 1095-C
The legislation codifies ALEs’ ability to provide Forms 1095-B and 1095-C electronically to individuals with consent, which is presumed when an individual has affirmatively consented at any prior time to receive such statements electronically. Consent can be revoked by the individual in writing. This amendment applies to statements due after December 31, 2024.
Additionally, the legislation streamlines the distribution process for Forms 1095-B and 1095-C by codifying the “alternative method” for distributing Form 1095-B, and extending this methodology to Form 1095-C. Under the alternative method for distribution, ACA reporting entities can bypass the requirement to distribute Form 1095-B / Form 1095-C to individuals; instead, the Forms would be available to the individual upon request. The alternative method requires the employer or health insurer to “provide clear, conspicuous, and accessible notice” that the individual may request a copy of the Form. Upon request, the Form must be furnished to the individual by January 31st or within 30 days after the request was made, whichever is later. The IRS is expected to provide additional guidance regarding the notice requirement. This amendment shall apply to statements for calendar years after 2023.
Extended Response Time for ESRP Assessments
Applicable large employers (ALEs) may be subject to IRS assessments if they fail to offer adequate, affordable minimum essential coverage. The Act extends the response period for initial IRS proposed assessments from 30 days to 90 days. The added time gives employers a longer window to respond to proposed penalties and alleviates the need for employers to request extensions to address discrepancies. The extended response time is applicable to assessments proposed in tax years beginning after December 23, 2024.
Statute of Limitations on Penalty Assessment
The legislation mandates a six-year statute of limitations on the IRS’s ability to impose employers shared responsibility payment assessments. Previously, no statute of limitations was explicitly stated, making it difficult for employers to streamline their compliance efforts. The statute of limitations applies to returns due after December 31, 2024.
TIN Reporting Flexibility
ALEs completing the Forms 1095-B and 1095-C filings will be able to utilize a covered individual’s name and date of birth in lieu of their tax identification number (TIN) or social security number (SSN) when the TIN/SSN is unavailable. This flexibility was typically allowed by the IRS; however, the legislation codifies this practice. This amendment applies to returns after December 31, 2024.
Action Items:
- Review current ACA reporting practices to align with new flexibilities and requirements.
- Discuss these changes with ACA reporting vendors to determine whether they are prepared to support the reporting process should the employer opt to implement optional changes.
- Update employee communications and reporting processes to inform employees of the changes.
- Ensure document retention policies meet the six-year statute of limitations.
The Employer Reporting Improvement Act and Paperwork Reduction Act are both federal laws and only impact the reporting obligations to the IRS. Employers with employees in states with their own reporting requirements will need to be conscientious of the state’s requirements to ensure continued compliance. It is not immediately clear whether states will also ease their reporting obligations as a result of this legislation.
For additional information or assistance, please contact your Account Team.
