IRS Proposes Changes to ACA Reporting

The IRS has released an advanced copy of proposed regulations that, if finalized, will ease some of the ACA reporting requirements for employers. The IRS also used the publication as another opportunity to announce that the era of leniency for inaccurate or incomplete reporting has ended. There are three key changes proposed in the regulations:

  • Extension of 1095 Deadline
  • Alternative to Furnishing 1095 Statements
  • Elimination of Transitional Good Faith Relief 
     

Deadline Extension for Furnishing 1095s to Individuals

The proposed regulations would permanently extend the deadline for furnishing Form 1095-B and 1095-C to individuals. The deadline would change from January 31 (current) to 30 days after January 31 or March 2nd (except in a leap year). If the deadline falls on a weekend or legal holiday, the form is due on the next business day. This proposed extension generally aligns with the extensions that have been granted each year since the requirements took effect. This action would make the change permanent.
 

Alternative to Automatically Furnishing Statements: 1095-B

The proposed regulations offer an alternative to automatically furnishing statements in certain situations. In short, carriers who are required to furnish Forms 1095-B to insureds (to report fully-insured minimum essential coverage being provided) would be able to employ an alternate communication method rather than mailing forms to individuals. This includes:

  • Posting a “clear and conspicuous” notice on its website
  • Providing information about how to request a form
  • Furnishing a Form 1095-B within 30 days after an individual’s request is received.

The notice must remain in the same location on the website until October 15 of the year following the calendar year to which the statement relates.

The IRS is easing these reporting requirements primarily due to fact that the information has little utility, since Congress lowered the penalty for the “individual mandate” to $0, effective as of 2020. It is subject to change if the individual mandate is increased in the future.
 

Alternative to Automatically Furnishing Statements: 1095-C

Unlike the individual mandate penalty, the employer Shared Responsibility Payment penalties are still in play. Therefore, this relief does not apply to furnishing statements to an Applicable Large Employer’s (ALE) full-time employees or reporting information to the IRS. However, similar relief is available to ALEs with respect to furnishing Forms 1095-C to non-full-time employees and non-employees enrolled in the ALE’s self-insured health plan.
 

Elimination of Good Faith Relief

Since the requirements came into play, employers have enjoyed an era of transitional good faith relief where the IRS has been accommodating of employers filing incomplete or inaccurate information on Forms 1094 and 1095. In 2020, the IRS first announced that it would cease to provide the “transitional good faith relief” that it had previously offered. These new regulations reiterate that this relief from penalties for reporting incorrect or incomplete information will no longer be available for reporting for tax year 2021 and beyond. The IRS noted that an exception from penalties may still be available if the filer can show reasonable cause for the failures.
 

What About State Reporting?

To date, we are not aware that any states have followed suit in offering parallel relief for state reporting requirements. Stay tuned for more updates.
 

Effective Date

The changes in the proposal would apply for calendar years beginning after December 31, 2021, but insurers and ALEs may choose to apply the changes for calendar years beginning after December 31, 2020. Although these are proposed regulations, they may be relied upon by taxpayers.

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