On December 23, 2024, President Biden signed into law two pieces of legislation that will ease the burden on employers and insurance carriers that need to submit information to the IRS and employees on health care coverage. The Paperwork Burden Reduction Act (H.R. 3797) allows employers to use the alternative furnishing method for all Forms 1095-C, Employer-Provided Health Insurance Offer and Coverage. The Employer Reporting Improvement Act (H.R. 3801) changes tax identification number (TIN) requirements and sets definite response times and limitations periods for IRS enforcement of Affordable Care Act (ACA) filing requirements.

Background

IRC Section 4980H, which was added by the ACA, imposes excise taxes (commonly known as the employer mandate penalty) in certain situations on applicable large employers (ALEs) if any of their employees receive premium tax credits for the purchase of their own health care coverage from one of the health care marketplace exchanges.

ALEs must file Form 1094-C with the IRS, as well as file with the IRS and furnish to employees Form 1095-C, to report information required under IRC Sections 6055 and 6056 about the offer of employer-sponsored health care coverage and the employees' enrollment in that coverage. The IRS uses these forms to assess ESRPs.

For fully insured plans, insurance companies use Form 1095-B, Transmittal of Health Coverage Information Returns, to inform employees of their health care coverage. An alternative manner of furnishing, where the entities post on their website that the information may be sent out upon request, is permitted in most cases for Form 1095-B.

Proposed legislation to ease the filing burdens on employers and insurance carriers was released in June 2023 (see Tax Alert 2023-1046). The final legislation adopts the proposed legislation without any changes.

Paperwork Burden Reduction Act

The Paperwork Burden Reduction Act (H.R. 3797) amends IRC Sections 6055(c) and 6056(c) by allowing the use of the alternative method of furnishing for Forms 1095-B and all Forms 1095-Cs. This means that reporting entities do not have to send written notices to individuals so long as they post a notice prominently on their website that individuals may receive a copy of their form upon request. Previously, Forms 1095-B and certain Forms 1095-C (i.e., those that only reported enrollment in Part III (1G forms with enrollment)) did not have to be furnished annually. Under the Act, if requested by the participant, the form must be furnished by January 31 of the year following the calendar year for which the return was required to be made or 30 days after the request.

It is anticipated that the alternative manner of furnishing the Form 1095-C statements will mirror those of the 1095-B. To use the alternative manner of furnishing statements, the following conditions must be met:

• The employer must provide a clear and conspicuous notice, in a location on its website that is reasonably accessible to all responsible individuals, stating that responsible individuals may receive a copy of their statement upon request
• The employer must post the notice on its website by January 31, 2025, and retain the notice in the same location on its website through October 15, 2025
• The employer must furnish the statement to a requesting responsible individual within 30 days of the date the request is received; to satisfy this requirement, the employer may furnish the statement electronically if the recipient affirmatively consents

Observation: The Act extends the alternative method for furnishing forms to all Forms 1095-C. While the legislation as passed requires these forms to be available by January 31, the due date for furnishing all ACA forms was permanently extended to March 2 (see Tax Alert 2022-1881). Therefore, employers that want to take advantage of this alternative but are not ready by January 31 will likely want to consider furnishing the forms through the mail for the initial year depending on how quickly the IRS releases the instructions on how to satisfy the alternative method of furnishing. Please note the instructions for furnishing the 1095-B forms have already been updated to March 3, 2025, because March 2 falls on a Sunday.

Employer Reporting Improvement Act

TIN reporting: The Employer Reporting Improvement Act (Act) amends IRC Section 6055(b)(1) to codify the ability of the reporting entity to substitute a covered individual's full name and date of birth for the individual's name and TIN if the TIN is missing. This provision is effective for returns due after December 31, 2024.

Observation: This flexibility to report the date of birth in place of missing TINs already exists in the regulations and is now in the Code. The change only applies to IRC Section 6055, which is the section dealing with reporting enrollment — i.e., Forms 1095-B, and Part III of Form 1095-C. There is no equivalent change to IRC Section 6056, which mandates the information for Parts I and II of Form 1095-C. Therefore, the requirement of having an accurate Social Security Number (SSN) to complete the Form 1095-C has not changed (IRC Section 6056 only requires a TIN for each "full-time employee," but the final regulations require it to be the SSN).

Electronic statements: The Act amends IRC Section 6056(c) to allow consent for electronic delivery of Forms 1095-B and 1095-C to be in place indefinitely, until revoked by the recipient. This is effective for returns due after December 31, 2024.

Observation: This generally codifies the existing regulations on electronic reporting under IRC Sections 6055 and 6056.

Timing of response: The Act amends IRC Section 4980H(d) to give ALEs at least 90 days (instead of the previous 30) to respond to a Letter 226-J (assessing an ESRP). This is effective for assessments proposed in tax years beginning after the date of enactment.

Observation: This is a more reasonable period for an employer to respond to a Letter 226-J and eliminates the common practice of needing to ask the IRS for an extension to respond, which it typically grants.

Statute of limitations: The Act amends IRC Section 6501 to establish a six-year limitations period for assessing ESRPs. The limitations period begins to run on the due date for filing Forms 1094-C and 1095-C or the date the return is actually filed, if later. This is effective for returns due after December 31, 2024.

Observation: The IRS's former position was that no statute of limitations existed under IRC Section 4980H, which meant that the limitation period could be unlimited if an ALE failed to file returns for a calendar year.

Implications

The two Acts do not require any action on the part of employers but are meant to reform aspects of IRS ACA reporting that some employers have indicated are unreasonable and unduly burden their ability to comply. Taking advantage of the alternative method of furnishing could greatly simplify the process for printing and mailing Forms 1095-C for employers. They will need to consider if they want to pursue the alternative furnishing method for 2024 forms or wait and implement the new method for 2025.