The IRS has, once again, extended the deadline for distributing Affordable Care Act 1095 forms to individuals. In the recently-released Notice 2020-76, the IRS provided additional reporting relief for employers for the 2020 calendar year. However, while the 1095 form extensions may continue, the IRS indicated that this will be the last year that good faith reporting relief (described below) will be available. The Notice provides:

The due date for distributing Forms 1095-C or 1095-B to employees and individuals is extended 30 days to March 2, 2021.

  • The IRS will not grant an additional 30-day extension beyond this deadline. Even with this extension, the IRS specifically encouraged employers and other coverage providers to send the Forms to employees and individuals as soon as possible. 
  • The IRS also said that, if an employer submitted a request for a 30-day extension to furnish these forms, the IRS will not respond to that request since it is now moot. Given the early date of this release, there are likely very few extension requests filed.

Continued special relief for coverage providers only.

  • Continuing this year, the IRS is giving coverage providers (like insurance carriers) a limited pass on providing the 1095-B statements to individuals (filing with the IRS is still required).
  • Because the individual penalty for not having health insurance was reduced to $0, individuals do not need to report whether or not they had coverage to the federal government (although they may need the reporting for those states that have enacted individual mandates of their own).
  • To qualify for the relief, the coverage provider must post a notice on its website that the form is available on request. It also must provide the form within 30 days of a request.
  • Notably, this relief does not apply to self-funded employers who report coverage taken by full-time employees on Part III of the Form 1095-C. Therefore, that reporting is still required.
  • However, self-funded employers may take advantage of this relief if they are reporting on any employees who were not full-time for any part of 2020. This could apply, for example, to covered part-time employees, covered retirees, or COBRA beneficiaries. 
    • However, it would require the employer to post a notice prominently on its website that the forms are available on request and the employer would have to respond to a request within 30 days. Given that retirees and COBRA beneficiaries may not have access to an employer’s internal website, a post on the employer’s external website is likely required.
    • For employers with many part-time employees, retirees, or COBRA beneficiaries, this relief may provide cost savings.
    • However, from a practical perspective, many employers will likely find that the effort involved in separating out the small population of non-full-time employees on the plan is significant.

Good faith penalty relief is extended for the 2020 forms, but the IRS says this is last time.

  • This means employers and coverage providers who work in good faith to complete the forms will not be assessed penalties due to missing or inaccurate information.
  • This good faith relief only applies to the information in the forms, not the deadlines for providing or filing the forms.
  • In determining good faith, the IRS will take into account whether the employer or coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the data to appropriate parties.
  • Notably, employers and coverage providers are not eligible for this relief if they simply file the forms late with the IRS or miss the extended deadline for furnishing the forms to individuals. Therefore, timeliness is extremely important.
  • The IRS characterized this as the “Final” opportunity for this relief. Therefore, employers should pay close attention to the 2020 forms to ensure they operationalize the gathering and transmitting of the data, as this will be good preparation for next year.

Notably, the deadline for filing the forms with the IRS is not extended.

  • Therefore, employers filing by paper must submit their forms to the IRS by March 1, 2021 (because February 28 is a Sunday).
  • Those filing electronically have until March 31.
  • As a reminder, employers and coverage providers who are filing more than 250 of these reporting forms are required to file electronically.

Takeaway

Even with this relief, employers should focus on making sure reporting is accurate and timely, especially given that this is the last time the good faith relief is expected to be extended.  While the deadline extension and good faith relief will help an employer avoid penalties, the only way to do so is to make sure the forms are filed on time. Late or inaccurate forms could lead the IRS to issue a Letter 226J a year or two down the road creating additional headaches at that time. 

Additionally, employers will want to explore whether the limited relief for furnishing forms to individuals who were not full-time employees is worth the effort. HUB will continue to monitor the ACA reporting developments and keep you apprised as the law evolves.

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

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.