Compliance News | October 8, 2020

Guidance on ACA Reporting for 2020

On October 2, 2020, the Treasury Department and the IRS released guidance on information reporting required under the ACA for 2020 that:

  1. Extends the deadline for distributing Forms 1095-B and 1095-C to employees and plan participants from January 31, 2021, to March 2, 2021
  2. Continues the enforcement policy that waives penalties for failing to distribute Forms 1095-B to participants if certain conditions (described below) are met
  3. Continues the IRS policy of not imposing penalties for incorrect or incomplete information when employers and other plan sponsors act in good faith and distribute and file the required forms on time, but notes that this is the last year such relief will be provided
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The enforcement policy may be useful to group health plans (such as multiemployer health plans) that do not wish to mail paper copies of the Form 1095-B to participants, but have websites where they can post information about the availability of the forms. However, this flexibility is of limited use to large employers, which are still required to distribute Form 1095-C to full-time employees. That said, these employers may find the policy helpful if they also send information about self-insured coverage to employees who do not work full time.

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Background

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).

     

Process for Implementing the ACA Reporting Requirements

Reporting Entity

Participant Reporting

IRS Filing

Large employers

Forms 1095-C to full-time employees

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 self-insured plans

Forms 1095-B

Forms 1095-B filed with Form 1094-B, the transmittal form

 

1095-B enforcement relief announced in 2019 continues for 2020

In the guidance, Notice 2020-76, Treasury and the IRS reiterate that Congress reduced the ACA’s individual shared responsible penalty to zero effective January 1, 2019. This means that individuals no longer need to receive a Form 1095-B documenting their enrollment in coverage in order to complete their income tax returns. Nonetheless, since Congress did not change the reporting rules, reporting entities are still required to comply with the reporting laws.

Notice 2020-76 states that the IRS will not impose a penalty if a coverage provider fails to distribute Form 1095-B to plan participants when the coverage provider meets the following two conditions:

  1. Posts a notice prominently on its website stating that individuals may receive a copy of their 1095-B upon request. This notice must provide an email address and physical address to which a request may be sent, as well as a telephone number to use for asking questions.
  2. Provides Form 1095-B to any responsible individual within 30 days of the date the request is received.

This is an extension of the enforcement policy announced last year, which we discussed in a December 2019 insight.

The relief only applies to the Form 1095-B, not to the requirement to provide full-time employees with Form 1095-C. However, if a large employer uses Form 1095-C to report coverage of an individual who is not a full-time employee for any month of 2020 (e.g., full-year retirees or part-time employees), the enforcement relief would apply.

This relief does not affect the requirement to file these forms with the IRS by the required deadline, which means that reporting entities will still need to complete and file all required forms. The deadline for filing these forms is March 1, 2021 (if filing on paper) or March 31, 2021 (if filing electronically, which is required when filing 250 or more forms of either type). (The usual paper filing deadline of February 28 moves to March 1 because February 28 is a Sunday.)

Implications for employers and other plan sponsors

Employers and other plan sponsors should do the following:

  • Contact any third-party vendor that handles distribution of these forms to clarify roles and responsibilities for the 2020 reporting year.
  • Watch for release of the final forms and instructions for 2020.

After the federal individual mandate penalty was reduced to zero, several states enacted their own individual mandate laws (e.g., California, New Jersey, Rhode Island and the District of Columbia) 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, 2021) for providing Forms 1095-C and 1095-B should consider whether they must meet earlier delivery deadlines in order to comply with applicable state requirements.

Plan sponsors that distribute a Form 1095-B should decide whether they wish to provide paper copies of the form or, instead, post a notice on the plan’s website stating that individuals may receive a copy upon request. Plans that wish to take advantage of the new limited relief should consult with their plan professionals on the appropriate steps to take to comply with Notice 2020-76.

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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.

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