SHRM Asks IRS Not to Increase Employer Reporting Burdens Under Proposed ACA Fix

An IRS proposal could make Affordable Care Act reporting more complex

Stephen Miller, CEBS By Stephen Miller, CEBS June 3, 2022
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SHRM Asks IRS Not to Increase Employer Reporting Burdens Under Proposed ACA Fix

The Society for Human Resource Management (SHRM) has asked the Internal Revenue Service to ensure that proposed regulations expanding access to subsidies for Affordable Care Act (ACA) marketplace plans to employees' family members do not create new administrative burdens for employers.

Emily M. Dickens, SHRM's chief of staff, head of government affairs and corporate secretary, signed the comment letter addressing an IRS proposed rule published in the Federal Register in April.

Ending the 'Family Glitch'

Under the ACA, employees and family members are not eligible for a premium tax credit to buy coverage through the ACA's health insurance marketplace if the employee has access to "affordable" health insurance through an employer.

The proposed rule would make nonemployee family members eligible for financial assistance in the ACA marketplace if coverage for the family as a whole costs more than about 10 percent of their household income under the lowest-cost employer-sponsored option. The rule would take effect in 2023.

This change, advocates say, would fix the so-called "family glitch" regarding family members' access to premium tax credits in their own right.

Tax attorneys have noted that in order for the IRS to make premium tax credit determinations involving family coverage, the agency could require further information reporting from employers on IRS Forms 1094 and 1095. 

For instance, while employers currently only report the lowest-cost employer-sponsored self-only plan to the IRS, fixing the "family glitch" could pave the way for a new requirement to also report on the lowest-cost family plan, among other changes.

SHRM's Concerns

In its letter, SHRM asked the IRS to "consider the impact of these proposed regulations on the already complex reporting requirements" and specified the following areas of concern:

Minimum value reporting for dependents

Currently, dependents can't access a premium tax credit if the coverage offered to employees provides minimum value (without regard to whether the coverage offered to dependents provides minimum value). The proposed regulations would add a minimum value rule for family members of employees based on the benefits provided to the family members.

"While we understand the basis for this proposal, our concern is that it accomplishes very little by way of expanding access to premium tax credits while almost certainly adding administrative reporting complexity for employers," SHRM noted. "If employees are offered the opportunity to enroll in minimum value coverage, then dependents are almost universally offered the same opportunity."

The proposal, however, would likely require the IRS to create additional coding for employers completing the Form 1095-C, "adding complexity to a process that is already creating a significant administrative burden for employers," SHRM said.

Affordability reporting for dependents

Similarly, the proposed regulations would allow dependents to access a premium tax credit if the coverage offered by the employer is not affordable for those dependents. At present, dependents cannot access a premium tax credit if the coverage offered to employees is affordable (without regard to whether the coverage offered to dependents is affordable).

"While the department's proposal to address this 'family glitch' provides a more meaningful opportunity for access to premium tax credits than the minimum value proposal," SHRM noted, "it also creates the potential for even greater reporting complexity" and "would exacerbate existing challenges for HR professionals."

SHRM encouraged the IRS "to shift any associated tax reporting obligation to the individual level." The letter noted that parallels already exist within the tax reporting framework for doing so, such as reporting for health savings account eligibility.

"Employers have no obligation to issue a report to the IRS verifying that qualifying high-deductible health plan (HDHP) coverage was offered," SHRM pointed out. "Instead, individuals must report that they were enrolled in qualifying HDHP coverage when completing their individual tax return. We would encourage the IRS to employ a similar framework here."



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