Employers No Longer Need to Automatically Distribute ACA Reporting 1095 to Employees

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.

Ben Cohen

CEBS | Employee Benefits Relationship Manager

Interested in more?

Let's Talk

Tracking Variable Hour Employees: Understanding Measurement and Administrative Periods

Employers with variable hour employees face unique challenges when it comes to tracking hours and determining health insurance eligibility. Under the Affordable Care Act (ACA), businesses must use specific methods to measure employee hours and ensure compliance with health coverage requirements. Understanding the look-back measurement period, administrative periods, and stability period is crucial for staying compliant and avoiding penalties.

Please note, only employers with 50 or more full-time equivalent (FTE) employees are required to offer health insurance.

The Look-Back Measurement Period

The look-back measurement period is used to determine whether a variable hour employee qualifies as a full-time employee (30 or more hours per week) under the ACA. Employers can select a measurement period between 3 and 12 months to track an employee's hours worked. If the employee averages at least 30 hours per week over this period, they are considered full-time and must be offered health insurance coverage.

The Administrative Period

The administrative period allows employers time to review hours, determine eligibility, and complete the necessary steps to offer coverage. This period cannot exceed 90 days and typically follows the look-back measurement period. it is important to note that the administrative period should not create a gap in coverage if an employee is determined to be eligible.

The Stability Period

Once an employee is deemed full-time, they must be offered health insurance for a stability period, which must be at least as long as the measurement period but no shorter than six months. Even if the employee's hours drop below full-time during the stability period, they remain eligible for coverage until the end of this period.

Who is Eligible for Health Insurance?

An employee is eligible for employer-sponsored health insurance if they work an average of 30 or more hours per week during the look-back measurement period. Full-time employees (those with a consistent schedule of 30+ hours per week) are generally eligible immediately, while variable hour employees must first complete a measurement period.

How Long Are Employees Eligible?

Once an employee qualifies for health insurance, they remain eligible throughout the stability period, regardless of any fluctuations in their work hours. If they continue to meet full-time criteria in subsequent measurement periods, their eligibility continues. If their average hours fall below 30 during a measurement period, they may lose eligibility once the stability period ends.

Key Takeaways for Employers

1. Chose a Measurement Period: Employers must select a look-back measurement period (3-12 months) to assess variable hour employees' eligibility

2. Account for Administrative Processing: The administrative period allows time to determine eligibility and offer coverage but cannot delay or shorten an eligible employee's access to benefits.

3. Maintain Stability Period Compliance: Employees determined to be full-time must receive coverage for the entre stability period, even if their hours decrease.

4. Avoid Penalties: Failure to properly track and offer coverage to eligible employees can result in significant ACA penalties.

Properly tracking variable hour employees and adhering to ACA guidelines ensures compliance and provides employees with the benefits they are required to be offered. Employers should review their policies regularly and leverage technology to streamline the tracking process. Have additional questions? Contact your Rose Street Advisors team today! If you are not a current client of Rose Street Advisors, please feel free to contact us at 260-552-3200 or contact@rosestreetadvisors.com to speak to someone.

Justine Dickens

EMPLOYEE BENEFITS ADVISOR

Justine is a devoted and meticulous team member with a passion to educate and support business partners and their employees. Since 2013, Justine’s commitment to her clients has allowed her to instill confidence and stability in the benefits packages offered to their employees. Her strengths allow her to communicate efficiently, focus on customization and understand the complexities of an ever changing industry. She is a Dale Carnegie Graduate and has her NAHU Self-Funded Certification.

When she is not working, Justine is busy running her son and daughter to their practices and games and volunteering in the community. She enjoys playing golf, hiking and spending time with her family and friends.

Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. Rose Street Advisors is independently owned and operated. #4515345

PCORI Fees - What are They and When Do I Pay Them?

One of the many requirements in the Affordable Care Act (ACA) is the Patient-Centered Outcomes Research Institute (PCORI) fee, an often overlooked but essential aspect of compliance. The PCORI fee is a charge imposed on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans. It was established to fund the Patient-Centered Outcomes Research Institute, an organization tasked with improving the quality and relevance of evidence available to help patients, caregivers, and healthcare providers make informed health decisions.

Who Needs to Pay the PCORI Fee?

The fee applies to: • Health Insurance Providers: Issuers of specified, fully insured health insurance policies. For fully insured health plans, the insurance carrier pays the PCORI fee on your behalf. No action is required of the employer. • Self-Insured Plan Sponsors: Employers or plan sponsors of applicable self-insured health plans, including Health Reimbursement Arrangements (HRAs). The employer is responsible for the PCORI fee for self-insured health plans and HRAs.

How Much is The PCORI Fee?

The PCORI fee amount is adjusted annually and is based on the average number of lives covered under the policy or plan. As of the most recent update, the fee is: • $3.00 per covered life for plan years ending on or after October 1, 2022, and before October 1, 2023. • $3.22 per covered life for plan years ending on or after October 1, 2023, and before October 1, 2024. The fee increases slightly each year based on the projected increases in national health expenditures.

Calculating the PCORI Fee

Calculating the PCORI fee involves determining the average number of lives (employee, spouse and dependents) covered under the policy or plan during the plan year. Please note that for HRA plans, an employer pays the PCORI fee only on the number of participating employees, not including covered spouses and dependents. There are several methods for this calculation: 1. Actual Count Method: Count the total number of covered lives for each day of the plan year and divide by the number of days in the year. 2. Snapshot Method: Add the total number of lives covered on one date (or more dates, if using the "more dates" variation) in each quarter of the plan year and divide by the number of dates used. 3. Form 5500 Method: Use the participant counts reported on the Form 5500 for the plan year, if filed. Plan sponsors can choose the method that best fits their reporting capabilities, but they must use the same method consistently within a given plan year.

Reporting and Payment

To report and pay the PCORI fee, issuers and plan sponsors must file Form 720 (Quarterly Federal Excise Tax Return) annually, by July 31 of the year following the last day of the plan year. The fee is reported in Part II of the form under "Patient-Centered Outcomes Research Fee". The latest version of Form 720 can be found here: https://www.irs.gov/pub/irs-pdf/f720.pdf (see Part II, IRS No. 133). Ensuring compliance with PCORI fee requirements is critical to avoid penalties. Failure to pay the fee or report it accurately can result in interest and penalties imposed by the IRS. For more detailed information, refer to the IRS instructions for Form 720 or reach out to your Rose Street Advisors team for assistance.

Alicia Ball

STRATEGIC OPERATIONS ADVISOR

As Strategic Operations Advisor, Alicia has the opportunity to lead the Employee Benefits Department every day. The focus of her role is to ensure the Department is operating at maximum efficiency, which allows us to ensure that our client’s needs and expectations are consistently exceeded. She accomplishes this efficiency through her strong communication, ability to maximize resources and staying true to Rose Street’s core values. Alicia’s tenure with Rose Street began in 2016 as our Maxwell Health Champion. She then spent time as a Employee Benefit Advisor where she built long lasting relationships with her clients that remain in place today even with her role change. In her spare time, Alicia tries to keep up with her very busy son, volunteers as a Big Sister for the Big Brother, Big Sister organization, and makes sure to spend as much time outside as she possibly can.

Interested in more?

Let's Talk