ACA Reporting Updates: What Employers Need to Know

On December 23, 2024, significant changes to the Affordable Care Act (ACA) reporting requirements were enacted with the signing of the Employer Reporting Improvement Act (ERIA) and the Paperwork Burden Reduction Act (PBRA). These new regulations impact how employers and health insurance providers distribute IRS Forms 1095-B and 1095-C, bringing relief from some administrative burdens while introducing new requirements.  

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Forms 1095-B and 1095-C are essential components of ACA compliance. Form 1095-B is used by health insurers and small, self-insured employers to report coverage details, while Form 1095-C is completed by applicable large employers (ALEs) with 50 or more full-time employees to report coverage offered to full-time employees and their dependents. Both forms must also be submitted to the IRS along with Forms 1094-B and 1094-C, which summarize the information provided.

Key Updates to ACA Reporting Requirements

New Distribution Rules for Employees

Under the PBRA, employers and plan sponsors are no longer required to distribute Forms 1095-B and 1095-C to all employees. Instead, they must provide a "clear, conspicuous, and accessible" notice informing employees that they can request a copy of these forms. Employers must furnish the requested forms by the later of January 31, 2025, or 30 days after receiving the request. While this change reduces the administrative workload, employers must still ensure they have an efficient system for handling employee requests.

Electronic Delivery Flexibility

The ERIA codifies the current practice of electronic delivery for Forms 1095. Employers may furnish these forms electronically to employees who have provided affirmative consent at any prior time. Unless the employee revokes their consent, the employer does not need to request updated approval each year. Despite the distribution changes, employers must still prepare and file Forms 1095-B and 1095-C with the IRS. These filings ensure the IRS can assess compliance with the ACA’s Employer Shared Responsibility provisions and determine any applicable penalties.

Other Important Changes

Extended Response Time for IRS Penalty Letters

Employers now have more time to respond to IRS Letter 226J, which notifies them of potential Employer Shared Responsibility Payments (ESRPs). The response window has been extended from 30 to 90 days, giving employers additional time to address and resolve discrepancies.

New Statute of Limitations for Penalty Assessments

Previously, there was no statute of limitations for the IRS to assess penalties related to ACA reporting. The amendments now limit the IRS to a six-year window for assessing penalties, starting from the due date or actual filing date of the 1095 Forms, whichever is later. This statute of limitations provides greater clarity and predictability for employers.

What This Means for Employers

While the changes bring some relief, employers must remain proactive in ensuring compliance. Employers should establish a process to provide employees with the required notification about requesting Forms 1095-B and 1095-C. The IRS has not yet issued specific guidance on how this notification should be delivered, but it must be clear, conspicuous, and accessible. Employers must also continue to prepare and file these forms with the IRS to avoid penalties. Ensuring employees understand how to request their forms and the associated deadlines and using the extended 90-day response period to thoroughly address any IRS inquiries or penalty assessments is essential.

Next Steps to Ensure Compliance

To align with the new regulations, employers should review internal procedures for ACA reporting and distribution to ensure they comply with the updated rules. Developing and testing a notification system for employees’ form requests, leveraging payroll and HR software to streamline compliance tasks, and staying informed as the IRS releases additional guidance are all crucial steps.

How Greenlink Can Help

At Greenlink, our team of knowledgeable advisors continuously monitors federal and state regulatory changes to keep our clients informed and compliant. We understand the complexities of ACA reporting and are here to provide guidance every step of the way. If you have questions about how these changes may impact your organization or need assistance implementing the new requirements, please don’t hesitate to contact us. We’re here to help you navigate these updates with confidence.

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