Compliance News | December 16, 2022
The Treasury Department and the IRS have published final regulations addressing information reporting required under the ACA for 2021 and future years.
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With limited clarifications, the final regulations track the proposed rules issued in the December 6, 2021 Notice of Proposed Rulemaking, which we discussed in a December 9, 2021 insight, “Guidance on ACA Reporting for 2021.” In summary, the final regulations:
The ACA created new reporting requirements related to enforcement of the individual shared responsibility penalty, the employer shared responsibility penalty and the premium assistance tax credits (available to certain individuals when purchasing coverage through the federal Marketplace/state Exchanges).
Congress reduced the ACA’s individual shared responsible penalty to zero effective January 1, 2019. Nonetheless, since Congress did not change the reporting rules, reporting entities are still required to comply with the reporting laws.
|Large employers (at least 50 full-time employees or equivalents)
|Forms 1095-C to
|Forms 1095-C filed with Form 1094-C, the transmittal form
|Large employers with
self-insured plans that cover part-time employees, retirees, COBRA enrollees
|Forms 1095-C or Forms 1095-B
|Forms 1095-C or Forms 1095-B filed with Form 1094-C or Form 1094-B, the corresponding transmittal form
|Other sponsors of
|Forms 1095-B filed with Form 1094-B, the transmittal form
In an effort to reduce administrative burdens for reporting entities and the IRS, the final regulations permanently grant employers and plans an extra 30 days to furnish the Forms 1095-B and 1095-C to employees and participants. In effect, this means that the January 31 deadline has been permanently moved to March 2. If the extended furnishing date falls on a weekend or legal holiday, statements will be timely if furnished on the next business day.
This relief does not affect the requirement to file these forms and transmittal forms with the IRS by the required deadline. The deadline for filing these forms is February 28 (if filing on paper) or March 31 (if filing electronically, which is required when filing 250 or more forms of either type).
Generally, a plan’s obligation to furnish a statement to an individual is discharged if the statement is mailed to the individual’s last known address or furnished electronically in accordance with electronic distribution requirements. However, the final regulation continues an existing policy that permits alternative distribution of the Form 1095-B.
The following criteria must be followed to take advantage of the alternative distribution method:
The alternative method only applies to the Form 1095-B, not to the requirement to provide full-time employees with Form 1095-C. Large employers must still distribute the Form 1095-C to full-time employees. However, if a large employer uses Form 1095-C to report coverage of an individual who is not a full-time employee (e.g., full-year retirees or part-time employees), the alternative method could apply.
Under the transitional good-faith relief, for calendar years 2016 through 2020, the IRS did not impose penalties on employers or plans if they could show that they made good-faith efforts to comply with the information reporting requirements. These final regulations confirm that such good-faith relief will no longer be available for calendar years after 2020 because it was intended to be transitional. Reporting entities will now have to demonstrate reasonable cause for failing to timely or accurately complete reporting requirements.
Employers and other plan sponsors should do the following:
After the federal individual mandate penalty was reduced to zero, several states (e.g., California, New Jersey and Rhode Island) and the District of Columbia enacted their own individual mandate laws and requiring the sending and filing of the federal forms to meet state requirements. Reporting entities that are interested in taking advantage of the extended deadline (March 2, 2023) for providing Forms 1095-C and 1095-B should consider whether they must meet earlier delivery deadlines in order to comply with applicable requirements of jurisdictions.
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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.