The Internal Revenue Service recently released a host of changes to Form 1095-C reporting required under the Affordable Care Act. This is welcome relief for large employers who struggle to deliver these forms to employees by the old January 31 deadline.
A. Deadline Extension
The IRS issued proposed regulations to permanently delay the deadline to deliver Form 1095-C to employees by 30 days from January 31 to March 2 (except in a leap year). If the due date falls on a weekend or holiday, the form is due the next business day. Although these are proposed regulations, they may be relied on by taxpayers.
As a refresher, Form 1095-C is used by Applicable Large Employers to report to employees and the IRS information such as whether the employer made an offer of coverage to its full-time employees, the amount of the employee contribution for health coverage, and the use of affordability safe harbors. Form 1094-C is used by Applicable Large Employers to transmit all Form 1095-Cs to the IRS. Both forms are used by the IRS to determine whether a sufficient number of full-time employees received an offer of coverage under the health plan and whether that offer is affordable. Both of those factors determine whether an employer shared responsibility payment (ESRP) is assessed.
Prior to the relief, Form 1095-C was required to be delivered to participants no later than January 31. However, for every year the reporting requirement has been in effect (since 2015), the IRS has extended the deadline, usually by 30 days. This guidance makes that extension permanent. Because the January 31 deadline coincides with other reporting deadlines, such as Form W-2, it created extensive administrative burdens for employers to timely deliver the form to employees. The extended deadline is welcome relief.
Note that the deadline for reporting Form 1094-C (along with all the Form 1095-Cs) to the IRS has not changed. That deadline remains February 28 for paper filings or March 31 if filed electronically. However, employers can still request a 30-day extension for the IRS filings.
B. Alternative Method for Furnishing Individual Notice
For plans that are fully insured, the IRS also made permanent reporting relief for Form 1095-B. This form is used to report coverage information for purposes of the individual mandate. But because the individual mandate penalty has been reduced to zero, the IRS no longer needs the information on this form. Therefore, insurers are not required to furnish Form 1095-B as long as the individual mandate remains at zero. Insurers are, however, required to send the form to employees upon request, and employees must be conspicuously notified of this right.
Note that this relief does not apply to Form 1095-C for full-time employees. This form must still be furnished to individuals and the IRS because it contains additional information regarding full-time status of employees, which the IRS needs for purposes of the employer mandate. However, employers are no longer required to send Form 1095-C to individuals who are not full-time employees, such as part-time employees, retired employees, or COBRA qualified beneficiaries. Instead, a clear and conspicuous notice must be provided on the employer’s website informing these individuals that they may receive the notice upon request. The notice must include certain contact information for the employer.
C. No More “Good Faith” Reporting Relief
The IRS has historically provided penalty relief for failure to accurately complete these forms provided that employers made a good faith effort at compliance. However, consistent with prior guidance, the IRS has announced that relief for inaccuracies will not be granted in future years. The good faith reporting relief was intended to just be transitional to allow time for employers to get used to accurate reporting.