On December 23, 2024, President Biden signed into law the Paperwork Burden Reduction Act (PBRA) and the Employer Reporting Improvement Act (ERIA), intended to simplify employer’s Affordable Care Act reporting requirements. The laws allow (i) flexibility for employers to furnish 1095-B and 1095-C tax forms to employees electronically and only upon request, (ii) the use of employees’ birthdates instead of taxpayer identification numbers (TINs), and (iii) employers more time to respond to penalty assessments in IRS Letter 226-J.
The Paperwork Burden Reduction Act
The PBRA amends the Internal Revenue Code (the “Code”) and reduces unnecessary paperwork related to health insurance coverage reporting for employers and employees. Under the PBRA, employers and health insurance providers are no longer required to send a copy of the 1095-B and 1095-C tax forms to covered individuals showing proof of minimum essential coverage unless a form is requested. Accordingly, forms which would otherwise be required to be sent out this month, January 2025, will now only be required to be sent upon request.
Previously, employers that provided minimum essential coverage were required to report this information to the IRS and provide each covered individual with a 1095-B or 1095-C tax form by January 31 of each year. Effective for tax forms starting with the 2024 calendar year, employers are no longer required to send the 1095-B and 1095-C tax forms to covered individuals unless a form is requested. However, note that employers must inform covered individuals of their right to request a form. The PBRA requires the employer or health insurer to “provide clear, conspicuous, and accessible notice (at such time and in such manner as the Secretary may provide)” that any covered individual may request a copy of such statement. If a 1095-C tax form is requested, it must be furnished to the individual by January 31 or 30 days after the date of the request, whichever is later.
The Employer Reporting Improvement Act
As mentioned above, previously employers were required to provide each covered individual with a 1095-B or 1095-C tax form by January 31 of each year; employers had to report required information using the covered individual’s TIN; and if an applicable large employer (i.e., 50 or more full-time employees) received a proposed assessment from the IRS (i.e., a Letter 226-J), the employer only had 30 days to respond.
The ERIA, intended to streamline employer reporting requirements and reduce administrative burdens of ACA compliance, now provides TIN reporting flexibility, allows electronic delivery, and extends applicable large employers response times around penalty assessments.
Effective for tax forms due after December 31, 2024, the ERIA provides for the following changes:
- Employers may use an individual’s date of birth to be substituted for the individual’s TIN if the TIN is not available.
- Employers can offer the 1095-B and 1095-C tax forms to individuals electronically if an individual affirmatively consented to receive forms electronically at any prior time. However, note that an individual may revoke such prior consent in writing.
- Employers now have at least 90 days to respond after the IRS sends its first Letter 226-J regarding a notice of proposed assessment (an increase from 30 days); and
- There is now a six-year statute of limitations for collecting penalty assessments. The six-year period begins “on the due date for filing the return under section 6056 (or, if later, the date such return was filed) for the calendar year with respect to which such payment is determined.”
These bills provide relief to large employers and reduce their burden under the ACA’s reporting requirements. If you have any questions about the subject of this article and its implications for your business, please contact Forework.