The New Year Brings New ACA Reporting Rules and Much Needed Relief

On December 23, 2024, President Biden signed two pieces of legislation into law, the Paperwork Burden Reduction Act and the Employer Reporting Improvement Act. These new laws make welcome changes to employer reporting under the Affordable Care Act (ACA) and should help ease the burden of certain reporting requirements for employers and health coverage providers.

The highlights of what is changing:

• Easier compliance:
  • Moving forward, employers and health coverage providers will now be able to more easily comply with distribution requirements for Forms 1095-B and 1095-C when handling ACA reporting, as those forms will only need to be distributed upon the request of an employee/covered individual.
• Electronic reporting now welcomed:
  • Employers and health coverage providers will now be permitted to distribute Forms 1095-B and 1095-C electronically, provided they have first received an employee’s consent to do so; employees will also have the right to withdraw their electronic consent in writing.
• Enforcement timelines have been adjusted:
  • Applicable large employers (ALEs) will now have ninety (90) days (previously it was just 30 days) to respond to a Letter 226-J from the IRS proposing employer shared responsibility penalties (ESRPs). Further, there will now be a six-year statute of limitations on the IRS’ ability to impose such penalties (previously there was no statute of limitations in place).

A deeper dive:

Paperwork Burden Reduction Act

The Paperwork Burden Reduction Act (PBRA) formally eliminates the employer requirement for automatic distribution of Forms 1095-B and 1095-C to employees to verify minimum essential coverage (MEC). Beginning with ACA reporting for 2024, the new law makes it so that reporting entities will now only need to provide these forms to employees upon request.

Although, it should be mentioned that in previous years the Internal Revenue Service (IRS) provided flexibility to reporting entities for furnishing Forms 1095-B only upon request, the PBRA officially codifies the rule and extends it to Forms 1095-C as well. Resultingly, any employee/covered individual who makes a request for either a Form 1095-B or 1095-C must receive the document by January 31st (following the calendar year which the form is related to) or 30 days after the initial request is made, whichever date is later.

In order to fulfill their part, employers and health coverage providers must first offer notice to employees informing them of their right to receive a copy of the forms, if requested. While the IRS has yet to offer more specific and nuanced guidance, the notice must be considered “clear, conspicuous, and accessible” in order to satisfy the obligation on the part of the employer and health coverage provider.

Employer Reporting Improvement Act

Going beyond the PBRA, President Biden also signed the Employer Reporting Improvement Act (ERIA) into law. This law further seeks to simplify the employer reporting process by codifying IRS regulations which will allow a person’s date of birth to be utilized as a substitute/alternative to a tax identification number (TIN) when a TIN is unavailable. Employers will no longer need to make multiple requests to swap in the TIN and can swiftly move forward with the date of birth instead.

The ERIA also gives ALEs some relief from a timing standpoint when responding to IRS Letter 226-J requests. Previously, ALEs had just 30 days to respond to these requests, which was quite burdensome for many employers. The IRS will now have to provide at least 90 days for an ALE to respond when a proposed employer shared responsibility payment is levied and a six-year statute of limitations on the IRS’ ability to impose any penalties will go into effect, an improvement upon the former lack of such a limitation to the IRS’ reach in these matters.

These changes will go into effect for employers for the Forms required to be filed after December 31, 2024.

In summary, the new laws will assuredly assist employers and health coverage providers to comply with some of the ACA’s more strenuous timing requirements more easily and effectively. While these changes will surely help alleviate some stress for employers, many vendors will not make any substantive changes to their delivery mechanisms for 2024’s Form 1095-Cs and will instead follow what has already been promised in their contracts, statements of work, and other documents related to 1094/5 fulfillment services, i.e., mailing them to covered individuals. Please check with your vendor for any specific changes that may be applicable for the most recent tax year.