On December 10 and 11, Congress passed two bills, the Paperwork Reduction Act (HR 3797) and the Employer Reporting Improvement Act (HR 3801), intended to simplify employer’s Affordable Care Act (ACA) reporting requirements. The bills are awaiting the president’s signature to become enacted. The laws would allow flexibility for employers to furnish 1095-B and 1095-C tax forms to employees electronically and only upon request. In addition, the laws would allow the use of employees’ birthdates instead of taxpayer identification numbers (TINs) and allow employers more time to respond to penalty assessments in IRS Letter 226-J.
As a refresher on ACA provisions, applicable large employers (ALEs) subject to the employer shared responsibility provisions are required to report on covered individuals under Internal Revenue Code (IRC) section 6056.
- C-Forms: Each ALE 1) satisfies the requirement to file a section 6056 return with the IRS by filing a Form 1094-C (transmittal) and, for each full-time employee, a Form 1095-C (employee statement), and 2) satisfies the requirement to furnish a section 6056 statement to a full-time employee by providing each of its full-time employees a Form 1095-C. The ALE’s transmittal to the IRS is called 1094-C, and the form furnished to full-time employees is called 1095-C.
- B-Forms: Health coverage providers are required to report under IRC section 6055 for purposes of IRS to administer ACA’s individual shared responsibility provision. Section 6055 requires reporting by any entity that provides minimum essential coverage to an individual (i.e., health insurance company for insured coverage, self-insured group health plan sponsors) must report to the IRS with Form 1094-B (transmittal) and 1095-B (employee statement) and furnish statements to individuals.
What’s New?
The following are highlights of the Paperwork Reduction Act and the Employer Reporting Improvement Act provisions impacting employers.
Paperwork Burden Reduction Act (HR 3797)
The Paperwork Burden Reduction Act passed the House and Senate on December 11, 2024. The act allows employers and health insurance providers to furnish1095-C and 1095-B tax forms (employee statements) upon request. This provision modifies ACA so that employers and health insurance providers are no longer required to send a copy of 1095-C and 1095-B to covered individuals showing proof of minimum essential coverage. The IRS previously allowed for 1095-B to be furnished to individuals only upon request. The Paperwork Burden Reduction Act provides statutory authority for this flexibility to 1095-B and extends this flexibility to 1095-C forms.
When the covered individual requests forms 1095-B or 1095-C, the employer or health insurance provider must furnish the form by either January 31 or 30 days after the date of the request, whichever is later. Employers and health insurance providers must give individuals timely notice of this request option, in accordance with any requirements set by the IRS. The Paperwork Burden Reduction Act requires the employer or health insurer to “provide clear, conspicuous, and accessible notice (at such time and in such manner as the Secretary may provide)” that any covered individual may request a copy of such statement.
Effective date: Furnishing upon request applies with respect to returns for calendar years after 2023.
Employer Reporting Improvement Act (HR 3801)
The Employer Reporting Improvement Act passed the House and Senate on December 10, 2024. This bill modifies provisions under ACA allowing TIN reporting flexibility, allowing electronic delivery and extending ALE response times around penalty assessments. The Employer Reporting Improvement Act is intended to streamline employer reporting requirements and reduce administrative burdens of ACA compliance.
The Employer Reporting Improvement Act covers four parts of the employer reporting process.
- Allows employers the option to use covered individuals’ full name and date of birth if the employer is unable to collect the covered individuals’ taxpayer identification number (TIN). Effective for information returns that are due in 2025.
- Allows employers to electronically furnish 1095-B and 1095-C tax forms to individuals who have previously agreed to electronic statements.
Applicable to statements due in 2025.
The last two parts of the act relate to penalty assessments. IRS Letter 226-J is the initial letter issued to ALEs to notify them that they may be liable for an employer shared responsibility payment (ESRP) under section 4980H. The determination of whether an ALE may be liable for an ESRP and the proposed penalty amount in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees. The letter explains the steps the employer takes if they agree or disagree with the proposed penalty assessment.
- Allows employers at least 90 days to respond after IRS sends its first letter about a proposed assessment (an increase from 30 days).
Applicable to assessments proposed in taxable years beginning 2025 (presuming the date of the enactment is in 2024).
- Creates a six-year statute of limitations on penalty assessments under section 4980H. The six-year period would begin “on the due date for filing the return under section 6056 (or, if later, the date such return was filed) for the calendar year with respect to which such payment is determined.”
Effective for returns which are due after December 31, 2024.
What’s the Same?
Employer and health insurance provider reporting to IRS remains unchanged. Transmittal submissions to IRS are still required (Form 1094-B and 1094-C) and due January 31. 2025.
What’s Next?
It seems that the President will sign these bills that Congress passed unanimously. Presumably for effective date purposes, the date of enactment will be in 2024. Several provisions refer to the Treasury Secretary or IRS providing guidance or instructions which could be released soon, especially if IRS confirms that January 31, 2025 is the general applicability date. Employers should check with their reporting vendors (if any) or with their service providers on timelines and next steps.
Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.
