Summary of Key Changes to ACA Reporting Requirements
On December 23, 2024, the Employer Reporting Improvement Act and the Paperwork Burden Reduction Act were signed into law, significantly altering the requirements for distributing IRS Forms 1095-B and 1095-C to employees and covered individuals.
ACA Reporting
As a reminder, the Affordable Care Act (ACA) required that Applicable Large Employers (ALEs) and health insurers report health coverage information to employees and covered individuals using Forms 1095-B or 1095-C. These forms were filed with the IRS alongside Forms 1094-B or 1094-C to determine if employers owed Employer Shared Responsibility Payments ("penalties").
Key Changes Introduced by the Acts
1. Distribution of Forms 1095-B and 1095-C
• Employers and insurers are no longer required to provide these forms to all eligible employees and/or covered individuals.
• A form must be provided only upon request, and it must be delivered by the later of:
• January 31 of the year following the coverage year, or
• 30 days after the request date.
• Employers must notify employees of their right to request these forms. However, a model notice hasn’t been created yet. Employers are expected to make a good-faith effort in drafting this communication. Contact your Relationship Manager if you would like assistance with this communication.
• If employees have consented (or haven’t actively requested to NOT receive electronically), the communications and forms can be delivered electronically. Contact your Relationship Manager for more information on Electronic Safe Harbor communications.
2. Extended Response Time for IRS Penalty Letters and Statute of Limitations for Penalties
• Employers previously had a 30-day window to respond to IRS letters, often leading to rushed investigations and responses. Additionally, there was no statute of limitations for assessing penalties, leaving employers exposed to potential liabilities indefinitely.
• Employers now have 90 days, instead of 30, to respond to IRS Letter 226J before any further action is taken. This extension provides employers more time to investigate and address errors or missing information that often result in proposed penalties.
• A six-year limit now applies to the IRS’s ability to assess penalties, starting from the later of:
• The due date of the 1095 Forms, or
• The actual filing date.
Effective Dates
• The Paperwork Burden Reduction Act applies to calendar years after 2023.
• The Employer Reporting Improvement Act applies to returns due after December 31, 2024.
• The distribution requirements for Forms 1095-B and 1095-C will no longer apply for returns due January 31, 2025, covering the 2024 calendar year.
ACA Reporting is Still Required!
• Employers must still prepare and file Forms 1095-B and 1095-C with the IRS, along with the associated Form 1094.
• These Acts only modify the distribution requirements for employees and covered individuals in group health plans.
As always, if you have any questions, please reach out to your Rose Street Advisors’ Relationship Manager.