IRS proposes ACA reporting relief and deadline extensions

The IRS recently issued a proposed regulation that would:

• Permanently and automatically allow a 30-day extension for furnishing reporting forms to individuals under the Affordable Care Act (ACA);
• Eliminate transitional good faith relief for inaccurate and incomplete Forms 1094 and 1095, provide an alternative method of distributing Forms 1095-B for self-insured small employers; and
• Clarify that minimum essential coverage (MEC) doesn’t include Medicaid coverage that is limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act of 2020 (FFCRA).

The proposed regulation, if finalized, would generally be effective beginning in 2022, but the IRS stated that entities may rely on the regulations now for the 2021 reporting submissions.

The Details

The ACA requires insurers, small employers with self-insured (including level-funded) health plans, and all Applicable Large Employers (those with 50 or more full-time and full-time equivalent (FTE) employees) to report certain information about health coverage to the IRS and provide full-time employees and covered individuals with an annual statement.

The proposed regulation:

• Provides an automatic extension of time for providing the statements to individuals to March 2 each year, or the next business day if that extended deadline falls on a weekend or legal holiday. The proposed regulation hasn’t changed the deadline for filing with the IRS. Those forms must be filed with the IRS by February 28 (if filing on paper) or March 31 (if filing electronically). Employers and coverage providers filing more than 250 forms must file electronically.
• Eliminates Transitional Good Faith Relief for inaccurate and incomplete forms. The IRS will no longer accommodate employers filing incomplete or inaccurate information on Forms 1094 and 1095 (as previously permitted under Notice 2020-76).
• So long as the individual mandate, otherwise known as shared responsibility, penalty remains zero, a small, self-insured employer may simply post a clear and conspicuous notice on the entity’s website stating that responsible individuals may receive a copy of their Form 1095-B upon request. This would be an alternative from mailing out individual Forms 1095-B to each enrolled individual. The notice must include an email address, a physical address to which a request may be sent, and a telephone number that responsible individuals may use to contact a reporting entity with any questions.
• States that minimum essential coverage (MEC) wouldn’t include Medicaid coverage that is limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act of 2020 (FFCRA). This would mean that an individual who had such Medicaid coverage for any month could be eligible for the premium tax credit (PTC) for that month, assuming they met all other applicable requirements. This change to the definition of MEC, once the regulation is finalized, would apply for months beginning after September 28, 2020, but taxpayers applying for the PTC may rely on the proposed regulations for months beginning after September 28, 2020, and before the regulation is finalized.

Next Steps

• If you are subject to ACA reporting requirements, determine if you wish to take advantage of the automatic extension for providing the ACA statements (1095-B or 1095-C) to individuals. In the absence of the extension, the deadline is currently January 31, 2022.
• Take extra care to ensure the information you are reporting, especially the coding on Forms 1095-C, is accurate.

Please contact your dedicated service professional with any questions.