The Acts generally codify regulatory rules giving employers and plans flexibility in reporting and provide additional relief in the enforcement process. Two changes are most significant: employers will have more time to respond to government requests for penalty assessments, and there is a new six-year statute of limitations.

Background

Under the ACA, plan sponsors and large employers (50 or more full-time employees or equivalents) are required to report information each calendar year about their offers of coverage to full-time employees by providing the employee with a form and filing information with the IRS. Large employers must provide full-time employees with Form 1095-C, documenting the offer of coverage and file all such forms with the IRS using the Form 1094-C transmittal. Group health plans, including multiemployer plans, must provide participants with a Form 1095-B, documenting enrollment in plan coverage and file all such forms with the IRS using the Form 1094-B transmittal.

For the 2024 coverage year, covered employers and plan sponsors must generally provide statements to individuals by March 3, 2025 and file returns with the IRS electronically by March 31, 2025 (or by February 28, 2025, if filing on paper). Employers that file at least 10 returns during the calendar year must file electronically. Significant penalties and interest apply if the returns are not filed timely or are incorrect.

New reporting rules

The new alternative distribution method, electronic delivery and TIN rules described below are effective for the 2024 forms that must be provided in 2025.

Alternative distribution method expanded

Under current law, IRS regulations permit plan sponsors to use an alternative distribution method to provide forms to individuals. To use the alternative distribution method, the plan posts a notice prominently on its website stating that individuals may receive a copy of their Form 1095-B upon request. The 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. In addition, the plan must provide the Form 1095-B to any responsible individual within 30 days of the date the request is received.

The Acts codify the alternative distribution method and extend it to large employers providing the Form 1095-C to full-time employees. The Acts permit use of the alternative distribution method for both forms if notice is provided of the availability of the forms and, if requested, the applicable form is provided by the later of January 31 or 30 days after the request.

Electronic delivery

Plans and employers are currently permitted to provide the forms to individuals electronically if the individual consents to receive them electronically. The Acts provide that an individual shall be deemed to have consented to receive a form electronically if they have affirmatively consented at any prior time, unless that consent is revoked in writing.

Taxpayer identification number (TIN) reporting flexibility

Plans and employers currently must report an individual’s TIN on the forms. If they do not have the TIN, the employer or plan must follow certain TIN solicitation procedures, including requesting the TIN a certain number of times. The Acts provide that if the plan or employer cannot collect the TIN, they may report the individual’s full name and date of birth in its place.

New enforcement rules

The IRS continues to vigorously enforce the ACA employer shared responsibility penalty, which applies when employers do not offer coverage to at least 95 percent of full-time employees or, even if coverage is offered, it is not affordable and an employee receives a premium assistance tax credit to buy individual coverage on the ACA Marketplace or a state Exchange. The penalty process begins when the IRS sends an employer a Letter 226J indicating that the IRS has proposed an assessment of the penalty. Often employers find that a careful examination of their reporting process will reveal that the penalty in the IRS Letter 226J can be reduced because the information relied upon was incorrect or the employer’s reporting was merely miscoded. However, employers need time in which to process the IRS request and develop a response.

Currently, employers have only 30 days to respond to the Letter 226J. The Acts extend that time to at least 90 days from the date of the first letter before the IRS can take further action with respect to the assessment. This will allow employers more time to meet with their professional advisors and reporting administrators to assure that the information in the Letter 226J is correct or, if not, to respond with accurate information. The change is effective for assessments proposed in taxable years beginning after December 23, 2024.

Finally, the Acts create a six-year statute of limitations for employer shared responsibility penalty assessments. Previously, the period for penalty assessments was open-ended. A statute of limitations helps to provide certainty in employer compliance efforts.

The six-year period begins on the due date for filing the Form 1094-C or 1095-C with the IRS or the date the return was actually filed, for the calendar year for which the penalty is assessed. The statute of limitation is effective for forms which are due after December 31, 2024.

Impact on plan sponsors and employers

The Acts provide additional flexibility and certainty for plan sponsors and employers when complying with the ACA. There may be some areas where the IRS will need to clarify how the new Acts apply where there is existing guidance, but in general plan sponsors and employers should be able to follow the new rules enacted under the Acts for reporting due in 2025.