Early Holiday Gift: Employer Reporting Simplification Bills Enacted

By: HUB’s EB Compliance Team

Those working in the health plan space in the early years following the Affordable Care Act’s (“ACA”) enactment likely remember the regular “good faith” relief the IRS would annually issue with regard to ACA employer reporting. Although parts of such relief were eventually phased-away, new reporting relief is coming from another place: Congress. 

Two Turtle Bills 

Congress recently passed, and the President is expected to sign, a pair of bills designed to simplify the ACA reporting process for employers and carriers. The bills had been sitting with the Senate since the summer, but made a mad holiday rush for the Resolute Desk in the Oval Office (famously a gift from Queen Victoria to President Hayes), in the last few days. The relief may send employers dancing and leaping.

Specific Relief from Turtle Bill One

The Paperwork Burden Reduction Act would allow employers and carriers to simply notify covered individuals of the availability of Forms 1095 without having to actually provide the forms. They would only be required to provide the forms upon request not later than: (a) January 31 after the year the form is designated to cover (the distribution deadline as stands today) or (b) 30 days after the request. In other words, if someone asks for a 2024 form in 2024, an employer would have until January 31, 2025 to provide it. By contrast, if the individual asks for it in 2025, the employer would have 30 days to provide it. This law would be effective starting January 1, 2024, which is perhaps a little odd, but the unusual effective date likely reflects how long the bill sat in Congress. 

Although this law would make Form 1095 distribution upon request, state jurisdictions with reporting mandates may still impose distribution requirements.

Specific Relief from Turtle Bill Two

The Employer Reporting Improvement Act (“ERIA”) makes more significant changes. The most significant change is adding a statute of limitations for the employer mandate penalty. As HUB reported previously, the IRS has historically taken the position that the employer mandate is not subject to any statute of limitations, meaning violations could potentially result in assessments decades down the road. Congress is now capping this potential penalty risk exposure at six (6) years from the filing of Forms 1095-C (or the due date for filing, if later). This starts with any enforcement by the IRS after the date the law is signed. This is welcome relief for employers since employers will now know how long to keep records of Forms 1095 and related information. 

Additionally, ERIA would require the IRS to give employers at least 90 days to respond to any letter stating an employer mandate penalty may be due. Historically, the IRS has required a response within 30 days but has been flexible in granting extensions. However, this built-in additional time would be welcome.

ERIA also allows employers to use dates of birth instead of Social Security Numbers/Taxpayer Identification Numbers, if the employer is not able to get the SSN/TIN. Notably, ERIA delegates to the Secretary of the Treasury/IRS to propose rule to this effect. The existing rules require three requests for the SSN/TIN before the date of birth can be used. While this change seems to indicate a desire to simplify the process for employers, the ERIA language is not that explicit. Employers will need to wait and see what new IRS rules are proposed.  This language is effective for returns filed after December 31, 2024, but there likely will not be enough time for the IRS to issue rules prior to the filing deadlines next year. 

Finally, ERIA opens the door for electronic delivery of Forms 1095 to employees. However, it would require the employee to affirmatively consent. It would also allow the employee to revoke the consent. Given the changes made by the Paperwork Burden Reduction Act described above, this is not terribly helpful. Additionally, tracking consents and opt-outs could be a burden for employers. 

Takeaways 

Like the oft-repeated IRS relief of bygone years, these changes come a tad too late to help employers for their 2024 forms filed in 2025, assuming they are signed by the President. However, unlike the historical IRS relief, these changes are permanent and will apply in future years. While some of these changes will require further rulemaking, employers can start discussing how to apply these rules (particularly the posting option under the Paperwork Burden Reduction Act) with their providers for their 2025 forms. 

 If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory. 

NOTICE OF DISCLAIMER 

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.