The IRS has granted via regulation a permanent 30-day extension to the Jan. 31 deadline for furnishing Affordable Care Act (ACA)-related Forms 1095-B and -C to individuals who, at any point in the prior year (the reporting year), were ACA full-time employees or covered under the employer group healthcare plan.
The IRS is eliminating its “good faith effort” standard for ACA-related filings for the 2021 and later calendar years, a standard that insulated insurers and employers from penalties for their errors and omissions on their ACA filings as long as the insurer or employer acted in good faith. The elimination of the good faith standard underscores the importance of the employer double- and triple-checking its Forms 1095-C provided to individuals, and its Forms 1095-C and Form 1094-C filed with the IRS.
The IRS regulation also makes permanent (for as long as the ACA individual mandate penalty is $0) a simplified way for self-funded employers to provide Forms 1095-C to individuals who had coverage under the self-funded plan during the reporting year but were not ACA full-time employees of the employer at any point in the reporting year.
The IRS, after years of providing annual, ad hoc 30-day extensions for health insurers and employers to furnish individuals a Form 1095-B or -C, is set to make permanent that 30-day extension. The permanent 30-day extension to the typical Jan. 31 deadline means insurers and employers will now have until on or about March 2 each year to furnish the forms.
While the IRS’s move is, at this point, reflected in a merely proposed regulation, the IRS says health insurers and employers can nevertheless rely on the proposed rule for their ACA forms due to be furnished in 2022 for the 2021 reporting year. This means insurers and employers have until March 2, 2022, to furnish 2021 Forms 1095-B and -C, as applicable, to employees and others who are entitled to receive them. The automatic 30-day extension will apply to future years as well.
Background: Furnishing (versus filing) Forms 1095-B and -C
Federal law requires that employers subject to the Affordable Care Act’s (ACA) employer mandate furnish to their ACA full-time employees a Form 1095-C by Jan. 31 each year, reflecting coverage offers (if any) made to the ACA full-time employees in the prior year. The law also requires, by the same deadline, self-funded employers to issue a Form 1095-C, and health insurers to issue a Form 1095-B, to any primary insured (typically the employee, retiree or COBRA enrollee) who had actual coverage under the employer plan in the reporting year, showing the months during that year in which they and, as applicable, their dependents had coverage under the plan.
Each year for the previous six years, the IRS has ultimately allowed health insurers and employers to furnish Forms 1095-B or -C, as applicable, by the date that is 30 days after the normal Jan. 31 deadline. The recently proposed regulation would make permanent the 30-day extension; employers would not need to file an extension request. This means the 1095-B and -C furnishing deadline would be extended to, typically, March 2 (or the next business day following March 2 if March 2 falls on a weekend or holiday).
Lockton comment: This furnishing deadline is different from the deadline for filing Forms 1095-B and -C with the IRS. That filing deadline is Feb. 28 for filings on paper or March 31 for e-filings. The filing deadline is not addressed in the recent regulation. A 30-day extension to the filing deadlines is readily available for the asking via Form 8809. However, the IRS will grant no additional extension to the furnishing deadline beyond the 30-day automatic extension granted by the recent regulation.
No more “good faith effort” standard!
From the first days of the employer mandate reporting effort in early 2016, the IRS has applied a “good faith effort” standard to insurer and employer 1095-B and -C filings that included mistakes or omissions (there was never “good faith” relief for a failure to furnish or file the forms). The IRS is eliminating that good faith standard going forward, including for forms due in 2022 for the 2021 reporting year.
Lockton comment: Pay heed, plan sponsors! Errors and omissions on Forms 1095-C, and the Form 1094-C transmittal form that accompanies the Forms 1095-C submitted to the IRS, have been legion and chronic over the prior six years, particularly with respect to the coding in Part II of Form 1095-C, and on the Form 1094-C in Column (a) of Part III, where employers are asked to certify compliance with the obligation to offer minimum essential coverage or better to at least 95% of ACA full-time employees. The IRS, which has always had the right to penalize employers for these chronic errors and omissions, is now getting serious. Check those codes in Part II of your Forms 1095-C, and your answers in Part III, Column (a) of your Form 1094-C transmittal!
Alternate method for furnishing Forms 1095-B and -C to certain individuals
Last year, for ACA forms furnished and filed in 2021 for the 2020 reporting year, the IRS offered insurance carriers and self-insured employers a special rule pertaining to certain individuals who were covered under the employer plan for at least a day in 2020. With respect to individuals covered under an insured plan, the insurance carrier was permitted to simply make the individuals’ Form 1095-B available, rather than furnishing the form automatically, provided certain requirements were met. Self-insured employers were entitled to the same accommodation with respect to furnishing Forms 1095-C, but only with respect to individuals who had coverage under the self-funded plan during the reporting year but were not ACA full-time employees at any point during that year.
The new proposed regulation makes that special accommodation permanent, as long as the federal individual mandate penalty remains $0.
Specifically, with respect to these individuals, a self-insured employer is deemed to meet the furnishing requirement if it:
Provides clear and conspicuous notice, in a location on its website that is reasonably accessible, stating that individuals may receive a copy of their Form 1095- C upon request. The notice must include an email address, a physical address to which a request for the form may be sent and a telephone number that an individual may use to contact the employer or carrier with any questions. The notice must be written in plain, non-technical terms and with letters of a font size large enough, including any visual clues or graphical figures, to call to a viewer’s attention that the information pertains to tax statements reporting that individuals had health coverage. For example, a clear and conspicuous notice titled, “IMPORTANT HEALTH COVERAGE TAX DOCUMENTS.”
Explains how individuals may request a copy of Form 1095- C.
Includes the self-funded employer’s email address, mailing address and telephone number.
Provides the form within 30 days of the date the request is received. With the individual’s consent, the form may be provided electronically.
The self-funded employer must retain the website notice in the same location on its website through Oct. 15 of the year following the calendar year to which the forms relate.
Lockton comment: To reiterate, this alternative method of making available the Form 1095-C to individuals who had coverage under a self-funded employer plan during the reporting year is not available with respect to such individuals if they were ACA full-time employees at any point in the reporting year.
Please join us Thursday, Jan. 6, 2022, for our annual ACA reporting webcast, which will cover this topic and other filing changes made for filings due for the 2021 calendar year. Click here (opens a new window) to register.
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.