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IRS Finalizes Delayed Effective Dates for ACA Filing Requirements

by | Dec 21, 2022 |

In past years, the IRS has extended the deadlines for employer and group health plan Affordable Care Act (“ACA”) reporting. In lieu of the deadline extensions, the IRS has now issued final regulations that provide for a permanent, automatic extension of the deadline for issuing reports to employees. It has also finalized an alternate method of reporting that may be utilized in lieu of mailing the returns to employees or providing them to employees with their Forms W-2. The deadline to file the required information returns with the IRS, however, has not been extended.

Background. Section 6055 of the Internal Revenue Code (the “Code”) requires group health plans that provide minimum essential coverage to an individual to report certain information to the IRS. The group health plan must also furnish statements to covered individuals containing the same information. The plan sponsor must report this information to the IRS by February 28 (March 31 if the information is provided by electronic filing) of the year following the taxable year to which it relates, and to the individual by January 31 of the year following the year to which it relates (the last permissible date for providing an employee with his or her W-2 statement). Employers that file 250 or more information returns with the IRS are required to file electronically.

Section 6056 of the Code requires Applicable Large Employers to file annual information returns with the IRS reporting the health coverage it offers to its full-time employees, and to furnish the full-time employees with the written statements containing the information that the employer is also required to report to the IRS. The timing for information returns under Code Section 6056 is the same as under Code Section 6055.

The IRS has issued ACA reporting forms as follows:

Transmittal Forms:

1094-B—for transmitting Forms 1095-B to the IRS.

1094-C—for transmitting Forms 1095-C to the IRS.

Reporting Forms:

1095-B—used by small, self-funded employers and insurers to report employees and their family members enrolled in minimum essential coverage.

1095-C—used by Applicable Large Employers (50 or more full-time and full-time equivalent employees), whether fully insured or self-funded, to report offers of coverage made to full-time employees.

Final Regulations. Under the final regulations, IRS provides for a permanent, automatic extension of 30 days for providing an employee with Form 1095-B, to indicate the months in which the individual had minimum essential coverage.

Also, the IRS announced the end of the transitional good faith relief policy it had been applying to inaccurate or incomplete filings. Beginning in 2022 with respect to filings for the 2021 year, the penalties under Code Section 6721 (for incorrect filings with an employee) and Code Section 6722 (for incorrect filings with the IRS) are each $280 if the responsible entity does not meet applicable deadlines. With a penalty of $280 for failing to timely report to an employee and an additional penalty of $280 for failing to timely report to the IRS, an employer could be penalized $560 per employee for failing to furnish accurate returns.

When these Code provisions were enacted, there was an associated penalty for not satisfying the individual mandate. However, when Congress reduced the penalty for the individual mandate to zero, the information returns given to individuals no longer had any effect on their individual income tax returns. As long as the individual mandate remains at zero, therefore, the IRS provides an alternative method of notifying individuals in lieu of mailing notices to the individual’s last known permanent address. A plan sponsor or insurer may utilize this alternative method if it:

  • provides a clear and conspicuous notice on its website that is reasonably accessible to all responsible individuals stating that they may receive a copy of their statement on request. The notice must include an e-mail address, a physical address to which a request for a statement may be sent, and a telephone number responsible individuals may use to contact the reporting entity with any questions. The notice must be written in plain, non-technical terms, calling to the reader’s attention that the information pertains to tax statements reporting that individuals had health coverage. The proposed regulations provide an example of a clear and conspicuous notice;
  • retains the notice in the same location on its website through October 15 of the year following the year to which the statements relate; and
  • furnishes the statement to a requesting responsible individual within 30 days of the request.

Employer Takeaway. Employers should ensure that they and their service providers are prepared to furnish health care reporting forms (Forms 1095-B/C) to employees and file these forms with the IRS by the applicable deadline or request an extension (Form 8809), as the IRS will no longer grant penalty relief on a mere showing of good faith efforts to comply. In addition, employers wishing to use the alternative method of reporting to employees need to consider making the changes necessary to utilize the alternative method and should discuss those changes with their service providers.