On December 12, 2022, the Internal Revenue Service (IRS) released final regulations providing employers an automatic, 30-day extension of the deadline to furnish individual statements for the Forms 1095-B and 1095-C (the "Forms") under the Affordable Care Act (ACA) along with several additional changes to ACA reporting requirements.
These final regulations track the proposed regulations that we previously reported on in 2021, with minimal changes, and will be effective on December 15, 2022. Read on for more information.
Automatic, 30-day Extension of Forms Deadline to Individuals
The IRS has repeatedly extended the January 31 deadline for Applicable Large Employers (ALEs)[1] to provide the Forms to individuals for the past seven years of ACA reporting obligations. These final regulations now permanently extend the deadline to furnish the Forms to individuals to March 2 (or the next business day if March 2 lands on a weekend or holiday).
For 2022 Forms, the deadline is automatically extended from January 31, 2023, to March 2, 2023.
Note that the deadline for submitting the Forms to the IRS remains the same — February 28 (for paper filing) and March 31 (for electronic filing).
Alternative Method of Furnishing Forms
The final regulations also permit certain ACA reporting entities to use an alternative method for furnishing the Forms to certain plan participants. The ACA reporting entities that may use this alternative method include:
- ALE self-funded plan sponsors for plan participants who are part-time employees and non-employees (such as COBRA enrollees or retirees).
- Non-ALE self-funded/level-funded plan sponsors and health insurance carriers that provide Form 1095-B to their plan participants (as proof of minimum essential coverage).
This alternative method requires these ACA reporting entities to:
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Post a clear and conspicuous notice on its website by March 2 and retain in the same location until October 15[2] of the next plan year. The notice must include an email address, a mailing address, and a telephone number for individuals to contact with questions along with informing these individuals how they may request a copy of their individual Form. The notice must be written in plain, non-technical terms and in a font size large enough to signal to the reader that the information pertains to health coverage tax statements.
The final regulations provide a "safe harbor" example for reporting entities to satisfy this notice requirement (as outlined in the paragraph directly above) by also including a statement or link on the main website page with the words “Tax Information,” which links to a secondary webpage with the words "IMPORTANT HEALTH COVERAGE TAX DOCUMENTS" in capital letters.
- Provide the individual Form within 30 days when requested by a plan participant. The Form may be provided electronically if the requesting participant consents to electronic receipt.
This alternative method is intended to reduce the administrative burden of ACA reporting for any tax years that the individual mandate is $0 (as it is currently) since the Forms are not required for these individuals to file their tax returns. This provision is subject to change if the individual mandate changes from $0.
Note that ALEs with self-funded group health plans cannot rely on this alternative method to furnish Forms to their full-time employees.
Elimination of Transitional Good Faith Relief
The IRS granted transitional good faith relief by not imposing penalties for incorrect or incomplete statements for ACA reporting obligations through the 2020 plan year if employers could show that they made good faith efforts to comply with the reporting requirements. The transitional good faith relief covered incorrect or incomplete information, including missing and inaccurate taxpayer identification numbers or dates of birth, reported on the Forms.
The IRS previously confirmed that 2020 was the last year that this transitional good faith relief would be available. As such, the final regulations confirm the elimination of this relief for the 2021 plan year and subsequent years. This change may result in large penalties for incorrect or incomplete Forms ($290 per return).
Employers who can show reasonable cause for failure to timely or accurately complete their ACA reporting requirements may still be eligible for penalty relief under the standard for a reasonable-cause waiver pursuant to IRC Section 6724.
Next Steps for Employers
- Ensure the 2022 Forms are furnished to individuals in advance of the March 2, 2023 deadline.
- Employers are once again strongly encouraged to review their 2022 Forms very carefully to ensure accuracy and completeness in an effort to avoid penalties as the prior transitional good faith relief is not available.
- Employers with employees in those states and local jurisdictions (California, Massachusetts, New Jersey, Rhode Island, Vermont, and Washington, DC) that require proof of coverage for individual state mandates are advised to continue to comply with those applicable rules and deadlines.
Risk Strategies is committed to keeping employers informed and up-to-date. Contact us at benefits@risk-strategies.com
[1] An ALE is an employer with at least 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year.
[2] If October 15 lands on a weekend or holiday, the next business day.
