Update: IRS Offers Extension for Delivering Employee FormsThe IRS, after initially saying there would be no automatic deadline extension for delivering Affordable Care Act (ACA) 1095 reporting forms to employees at the start of 2022, has now proposed a permanent, automatic 30-day extension, until March 2, for furnishing employee forms. The proposal says employers and insurers may take advantage of the extension for 2021 reporting forms before the rule is finalized.The proposal does not change the due dates for filing these forms with the IRS. See the SHRM Online article IRS Extends Deadline for Distributing ACA Forms to Employees.The article below has been updated to reflect this change. Employers should ensure that they and their service providers are prepared to furnish health care reporting forms to employees and file these forms with the IRS in this first quarter of 2022 as required under the Affordable Care Act (ACA), as the IRS will no longer grant penalty relief upon showing good-faith efforts to comply.The ACA requires applicable large employers (ALEs)—employers that during the prior year had 50 or more full-time employees or the equivalent when part-time employees' hours are combined—to submit reporting forms to the IRS and to distribute these forms to employees by the following deadlines: ACA Requirement Deadline1095 forms delivered to employeesJan. 31, 2022(automatic extension to March 2)Paper filing with IRS*Feb. 28, 2022**Electronic filing with IRSMarch 31, 2022** *Employers that file 250 or more information returns with the IRS must file the returns electronically. **Filers can obtain a 30-day extension on filing forms with the IRS by submitting Form 8809—Application for Extension of Time to File Information Returns—by the filing due date. Source: IRS.The IRS proposed regulations "make permanent a 30-day automatic extension for furnishing Forms 1095-B and 1095-C to individuals
," wrote Kellie M. Thomas, a principal in the Baltimore office of law firm Jackson Lewis. "Such forms will now be due each year on March 2 (or the next business day if March 2 falls on a weekend/holiday), and the relief is immediate—furnishers can rely on the proposed regulations for 2021 reporting (due in 2022)."
The proposed regulations, she added, "do not change the Feb. 28/March 31 due dates for submitting these forms to the IRS when filing by paper or electronically, respectively."
Danielle Capilla, vice president of compliance, employee benefits, at Alera Group, a network of insurance and financial services firms, advised that "employers should work diligently to complete their reporting forms on time." Many employers may still prefer to distribute the 1095 forms to employees alongside their W-2 tax forms, which must be furnished to employees by Jan. 31, she noted.
ACA Reporting Forms
The IRS has issued final versions of ACA forms for reporting on plan year 2021 coverage.
1094-B—for filing Forms 1095-B to the IRS.
1094-C—for filing Forms 1095-C to the IRS.
1095-B—used by insurance companies offering fully insured health coverage through employer-sponsored plans, and by small, self-funded employers, to document employees and family members enrolled in minimum essential coverage.
1095-C—used by ALEs who sponsor self-funded health plans to detail their offer of coverage so as to avoid potential employer mandate ("shared responsibility") penalties. Completed for every full-time employee, furnished to each employee and submitted to the IRS. Self-insured ALEs also must complete a Form 1095-C for any part-time employees who are enrolled in coverage.
Note: Employers that offer employer-sponsored self-insured health coverage to nonemployees who enroll in the coverage may use Form 1095-B, rather than Form 1095-C, Part III, to report coverage for those individuals and other family members.
The ACA's employer penalties levied against ALEs that do not provide required coverage to full-time employees under the statute's shared-responsibility provisions remain fully in place. By filing with the IRS and providing employees with copies, ALEs show they offered eligible employees health coverage that was compliant with the ACA.
ALEs are required to provide full-time workers with minimum essential coverage that meets affordability and minimum value thresholds, and they face penalties for failing to do so. Smaller employers are not required to provide health care coverage, but if they choose to do so, then the coverage must meet ACA criteria.
As regards furnishing annual ACA information forms to employees:
- If fully insured plans are offered by ALEs to employees, the insurance carrier provides Form 1095-B to covered individuals.
- If the plan is self-insured, all of the ACA reporting information for ALEs is included in the Form 1095-C and covered individuals will not receive a Form 1095-B.
- If smaller organizations (non-ALEs) sponsor self-insured plans, they must provide covered individuals with Form 1095-B but not Form 1095-C, subject to certain exceptions.
End of Good-Faith Relief
For ACA reporting years 2015 through 2020, the IRS provided penalty relief when employers reported incorrect or incomplete information on required ACA forms if the employer could show it made good-faith efforts to comply with the information-reporting requirements.
"This relief applied to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required" on a return filed with the IRS or furnished to employees, explained Gallagher, an HR and benefits consultancy.
"However, in Notice 2020-76, the IRS announced that it would no longer provide relief for good-faith efforts," beginning with reporting in 2022 on plan year 2021 coverage, Gallagher noted. "Thus, employers need to make sure that their data collection efforts and actual reporting contain the correct information for taxpayer identification numbers, dates of birth and other information contained on Forms 1095," the firm advised.
Late or inaccurate forms could lead the IRS to notify an employer that it may be liable for a penalty payment. The IRS may impose penalties of up to $280 per form for failing to furnish an accurate Form 1095-C or 1095-B to an employee. A separate $280 per-form penalty may be imposed for failing to file an accurate form with the IRS, for a potential $560 penalty per employee.
The above penalties are for incorrect reporting and are separate from ACA penalties for inadequate coverage:
- The Section 4980H(a) penalty, issued to ALEs that fail to offer minimal essential coverage to at least 95 percent of their full-time employees and their dependents, is $2,750 per employee, or $229.17 a month, for the 2022 tax year. The assessed amount will deduct 30 full-time employees from the total number of full-time employees.
The Section 4980H(b) penalty, issued per each employee that receives a premium tax credit/subsidy from a state or federal ACA marketplace exchange when the ALE does not offer a coverage option that meets the affordability threshold, is $4,120 per employee or $343.33 a month, for the 2022 tax year.
The IRS sends a Letter 226-J to notify ALEs that they may be liable for an employer shared responsibility payment.
[SHRM members-only toolkit: Complying with and Leveraging the Affordable Care Act]
IRS Letter 1865C: Correcting Your ACA Reporting Forms
If the IRS receives an ACA reporting document that it cannot process due to reasons such as a typo in the company's name or EIN, a misprint on the form where information does not appear in the proper box, or even the font being too small, it will send a Form 1865C. Employers have 30 days from the date of the letter to submit corrected forms.
States' Individual Mandates
Five states—California, Massachusetts, New Jersey, Rhode Island and Vermont—along with Washington, D.C., have enacted individual health coverage mandates that mirror the former federal requirement that individuals obtain ACA-compliant health coverage or pay a penalty tax. These states could require taxpayers to show proof of ACA-equivalent coverage or be fined by their states.
Employers should verify whether states with their own reporting requirements have updated their forms and know which states allow reporting using the federal forms and deadlines for furnishing state forms to employees.
In addition, employers should alert affected employees if their states of residence require coverage, what materials the employer will be providing, and what action the employees will need to take, said Kim Buckey, vice president of client services at DirectPath, a benefits advocacy and education firm.
"If they haven't already done so, now is certainly a good time to begin such communications," she advised.
Related SHRM Articles:
IRS Extends Deadline for Distributing ACA Forms to Employees, SHRM Online, December 2021.
IRS Lowers 2022 Employer Health Plan Affordability Threshold to 9.61% of Pay, SHRM Online, September 2021