Key 2021 ACA Reporting Deadlines

Every year Applicable Large Employers (ALEs) must file and furnish their ACA information to the IRS and their employees, respectively. Failing to do so can result in significant IRS penalty assessments.

To recap, only groups with 50 or more full time  or equivalent employees or those groups under 50 with self funded medical coverage are required to furnish their employees with copies of either the 1095-B or 1095-C forms (based on group size)

Employers will need to be sure you meet the following IRS deadlines for complying with the ACA’s Employer Mandate for 2020:

• February 28, 2021: Paper file your 2020 Forms 1094-C and 1095-C with the IRS no later than this date.

• March 2, 2021: Furnish Forms 1095-C to your full-time employees no later than March 2, 2021. This date was originally January 31, 2021, but the IRS has since issued an extension.

• March 31, 2021: Employers must electronically file the 2020 Forms 1094-C and 1095-C with the IRS no later than this date. 

Failing to meet these deadlines can result in penalties under IRC 6721/6722, which the IRS is issuing through Letter 972CG. If you receive one of these notices, you only have 45 days from the issue date to respond to the penalty notice. 

For the 2020 tax year, the penalties associated with failing to comply with IRC 6721/6722 for employers with average gross receipts of more than $5 million in the last three years are as follows:

Failure to timely file and furnish correct information returns 

If employers file ACA information returns with the IRS no more than 30 days after the deadline they could be subject to a $50 penalty per return not filed, not to exceed an annual maximum of $556,500. If the ACA information returns are 31 or more days late, up to August 1, 2021, the penalty per return jumps up to $110, not to exceed an annual maximum of $1,669,500. After August 1, the penalty amount steepens to $270 per return, not to exceed an annual maximum of $3,339,000. For intentional disregard, meaning the deadline was missed willfully, the penalty more than doubles to $550 per return with no annual maximum limit.

The penalty amounts for employers with gross receipts of $5 million or less in the last three years will have the same penalty amounts per return with lower annual maximums, except in the case of intentional disregard. For more information on the penalty schedules for failing to meet the IRS deadlines click here. 

As if the penalties for failing to meet the filing and furnishing deadlines weren’t enough, the IRS is also issuing penalties to employers that fail to comply with the ACA’s Employer Mandate. As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee, or be subject to Internal Revenue Code (IRC) 4980H penalties. These penalties are being issued through IRS Letter 226J.

 

IRS Provides Reporting Extensions Again for 2020

Earlier this week, the IRS issued Notice 2019-63, which extends both: (1) the filing deadline for Forms 1095-C and 1095-B; and (2) the good-faith reporting relief.  But this year, there’s more.  In limited circumstances, the IRS will not penalize entities for the failure to furnish information to individuals using Form 1095-B, and in some cases, Form 1095-C (see discussion of Section 6055 Relief below).

 Deadline Extension

Notice 2019-63 extends the due date for reporting entities to furnish 2019 Forms 1095-C and 1095-B to individuals from January 31, 2020 to March 2, 2020.  These forms must also be filed with the IRS (along with the applicable transmittal statement) by February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically).  Reporting entities may, however, request individual extensions to file these forms with the IRS.

Good-Faith Reporting Relief

The IRS may impose penalties of up to $270 per form for failing to furnish an accurate Form 1095-C or 1095-B to an individual and $270 per form for failing to file an accurate Form 1095-C or 1095-B with the IRS.  As in prior years, the IRS indicated in Notice 2019-63 that it would not impose these penalties for incomplete or inaccurate forms for the 2019 calendar year (due in 2020), if the reporting entity can show that it “made good-faith efforts to comply with the information-reporting requirements.”  This good-faith reporting relief does not apply to forms that were untimely furnished to individuals or filed with the IRS.

Section 6055 Relief

Under Section 6055 of the Internal Revenue Code (the “Code”), providers of minimum essential coverage must furnish certain information to “responsible individuals” about enrollment in the minimum essential coverage during the previous calendar year.  The purpose of this reporting requirement is to assist the IRS enforce compliance with the “individual mandate” penalty under the ACA.

Under the Tax Cuts and Jobs Act of 2017, the individual mandate penalty was not repealed, but the penalty amount was reduced to zero.  This makes reporting under Section 6055 of the Code irrelevant.  As a result, Notice 2019-63 provides limited relief from the reporting requirements under Section 6055 of the Code.

Here is a brief summary of the Section 6055 reporting requirements:

• Insurers. For employers that sponsor fully insured group health plans, the plan’s insurer must comply with the Section 6055 reporting requirements using Forms 1094-B and 1095-B.
• Self-Funded Plan Sponsors. For employers that sponsor self-funded plans, the employer must comply with the Section 6055 reporting requirements. But, the applicable forms depend on whether or not the employer is an “applicable large employer” that is subject to the Employer Shared Responsibility Payment (i.e., the “pay or play” penalty):
  • Small Employers. Employers that are not subject to the pay or play penalty use Forms 1094-B and 1095-B.  (Employers that are not subject to the pay or play penalty generally don’t have enough employees to sponsor a self-funded plan.  So, it is rare for employers to file Forms 1094-B and 1095-B.)
  • Large Employers. Employers that are subject to the pay or play penalty generally use Forms 1094-C and 1095-C.  (Forms 1094-C and 1095-C allow the employer to comply with its reporting obligations under both Sections 6055 and 6056 of the Code.  Under Section 6056 of the Code, employers must report compliance with the pay or play penalty.)

Notice 2019-63 provides relief with respect to Forms 1095-B and limited relief with respect to Forms 1095-C.  For insurers and small self-funded employers, the entity must still prepare and file the Forms 1095-B with the IRS.  However, these entities are not required to furnish individuals with a copy of the Form 1095-B as long as the entity satisfies both of the following requirements:

• The entity prominently posts a notice on its website stating that responsible individuals may receive a copy of their Form 1095-B upon request. The notice must contain both an email and a physical address that responsible individuals can use to request their Form 1095-B, and a telephone number that the responsible individual can use to contact the entity with questions.
• The entity furnishes the responsible individual with their Form 1095-B within 30 days of the date that the entity receives the request.

Notice 2019-63 generally does not extend this relief to large self-funded employers, except for Forms 1095-C that are prepared on behalf of individuals who are not full-time employees for the entire 2019 calendar year.  A large employer sponsor of a self-funded plan may file a Form 1095-C on behalf of an individual who was enrolled in the self-funded plan during the 2019 calendar year, but was not a full-time employee during any month of the calendar year.  (For these individuals, the “all 12 months” column of line 14 is completed using the code “1G.”)  Examples of where this relief may extend to Forms 1095-C are: (1) former employees who terminated employment before 2019 but were enrolled in the self-funded plan under COBRA or retiree coverage; and (2) employees who were part-time during all of 2019, but were enrolled in the self-funded plan because the plan sponsor extended eligibility for the self-funded plan to part-time employees.

Conclusion

While the filing deadline extension and the extension of the good-faith reporting relief is likely welcome news to insurers and employers alike, it’s probably not surprising.   And, while the Section 6055 reporting relief is likely surprising, it’s probably only meaningful to insurers.

IRS Announces Filing Extension for 2018 Forms 1095-B and 1095-C and Continued Good Faith Transition Relief

Late last week, the IRS announced it was extending the deadline for getting Forms 1095-B and 1095-C to employees from January 31, 2019 to  March 4, 2019. Despite the extension, the IRS encourage employers to furnish the form as as possible.

The extension to provide employees with a copy of Form 1095-B and 1095-C DOES NOT extend the due date for employer, insurers, and other providers to file the 2018 forms with the IRS. The filing due date for these forms remains February 28, 2019 (or April 1, 2019 if filing electronically), unless the IRS announces they will extend the filing due date. 

In Notice 2018-94 released by the IRS, they reveled that while failure to furnish and file the Form timely may subject employers to penalties, they should still attempt to furnish and file even after the applicable due date as the IRS will take this action into consideration when determining if penalties will be assessed. 

Good faith reporting standards will apply once again for 2018 reporting. This means that reporting entities will not be subject to reporting penalties for incorrect or incomplete information if they can show that they have made good faith efforts to comply with the 2018 Form 1094 and 1095 requirements. This relief applies to missing and incorrect taxpayer identification numbers and dates of birth as well as other required return information. No relief is provided, however, where there has not been a good faith effort to comply with the reporting requirements.

IRS Announces Filing Extension for Furnishing 2017 Forms 1095-B and 1095-C and Continued Good Faith Transition Relief

In IRS Notice 2018-06, the IRS announced a 30-day automatic extension for the furnishing of 2017 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage), from January 31, 2018 to March 2, 2018.  This extension was made in response to requests by employers, insurers, and other providers of health insurance coverage that additional time be provided to gather and analyze the information required to complete the Forms and is virtually identical to the extension the IRS provided for furnishing the 2016 Forms 1094-C and 1095-C.  Notwithstanding the extension, the IRS encourages employers and other coverage providers to furnish the Forms as soon as possible.

Notice 2018-06 does not extend the due date for employers, insurers, and other providers of minimum essential coverage to file 2017 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS.  The filing due date for these forms as it stands today remains February 28, 2018 (April 2, 2018, if filing electronically).

The IRS also indicates that, while failure to furnish and file the Forms on a timely basis may subject employers and other coverage providers to penalties, such entities should still attempt to furnish and file even after the applicable due date as the IRS will take such action into consideration when determining whether to abate penalties.

Additionally, the Notice provides that good faith reporting standards will apply once again for 2017 reporting. This means that reporting entities will not be subject to reporting penalties for incorrect or incomplete information if they can show that they have made good faith efforts to comply with the 2017 Form 1094 and 1095 information-reporting requirements. This relief applies to missing and incorrect taxpayer identification numbers and dates of birth, and other required return information. However, no relief is provided where there has not been a good faith effort to comply with the reporting requirements or where there has been a failure to file an information return or furnish a statement by the applicable due date (as extended).

Finally, an individual taxpayer who files his or her tax return before receiving a 2017 Form 1095-B or 1095-C, as applicable, may rely on other information received from his or her employer or coverage provider for purposes of filing his or her return. 

The IRS Gives A Holiday Gift to Applicable Large Employers – 2015 ACA Reporting is Delayed

In the recently released Notice 2016-4, the IRS has extended the due dates for certain 2015 Affordable Care Act information reporting requirements.

Specifically, the Notice extends:

• the due date for furnishing to individuals the 2015 Form 1095-B and Form 1095-C from February 1, 2016, to March 31, 2016, and

• the due date for filing with the IRS the 2015 Form 1094-B, Form 1094-C and Form 1095-C from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

In the Notice, the IRS also grants special relief to certain employees and related individuals who receive their Form 1095-C or Form 1095-B, as applicable, after they have filed their returns:

• For 2015 only, individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns will NOT be required to amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C.

• For 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns will NOT be required to amend their returns once they receive the Form 1095-B or Form 1095-C or any corrections.

Thus, generally, employers should not be concerned that furnishing these Forms on a delayed basis in accordance with the Notice will force employees to file amended 2015 income tax returns.

Finally, the extensions do not require the submission of any request or other documentation to the IRS and have no effect on information reporting provisions for other years.

Bill Increases Penalties for IRS Reporting Failures including ACA

In July 2015, President Obama signed into law the Trade Preferences Extension Act of 2015. Included in the bill was an important provision that affects welfare and retirement benefit plans. The Act sizably increases filing penalties for information return and statement failures under the Internal Revenue Code, effective for filings after December 31,2015. Employers now face significantly larger penalties for failing to correctly file and furnish the ACA forms 1094 and 1095 (shared responsibility reporting requirements) as well as Forms W-2 and 1099-R. 

Background

Sections 6721 and 6722 of the IRC impose penalties associated with failures to file- or to file correct- information returns and statements. Section 6721 applies to the returns required to be filed with the IRS, and Section 6722 applies to statements required to be provided generally to employees.These penalty provisions apply to the ACA shared responsibility reporting Forms 1094-B, 1094-C, 1095-B, and 1095-C (Sections 6055 & 6056) failures as well as other information returns and statement failures, like those on Forms W-2 and 1099.

For ACA:

• Section 6055 reporting supports IRS enforcement of the individual mandate
  
• Section 6056 reporting supports IRS enforcement of the employer mandate and low-income subsidies for coverage purchased in the public marketplace.

The Sections 6055 & 6056 reporting requirements are effective for medical coverage provided on or after January 1, 2015, with the first information returns to be filed with the IRS by February 29, 2016 (or March 31,2016 if filing electronically) and provided to individuals by February 1, 2016. 

Increase in Penalties

The Trade Preferences Extension Act of 2015 (Act) contains several tax provisions in addition to the trade measures that were the focus of the bill. Provided as a revenue offset provision, the law significantly increases the penalty amounts under Sections 6721 and 6722. A failure includes failing to file or furnish information returns or statements by the due date, failing to provide all required information, as well as failing to provide correct information. 

The law increases the penalty for:

• General failures- from $100 to $250 per return and increases the annual cap on penalties from $1.5 million to $3 million. 
  
• Intentional failures- from $250 to $500 per return with no annual cap on penalties

Other penalty increase also apply, including those associated with timely filing a corrected return. Penalties could also provide a one-two punch under the ACA for employers and other responsible entities. For example, under Sec 6056, applicable large employers (ALE) must file information returns to the IRS (the 1094-B and 1094-C) as well as furnish statements to employees (the 1095-B and 1095-C). So incorrect information shared on those forms could result in a double penalty- one associated with the information return to the IRS and the other associated with individual statements to employees. 

Final regulations on the ACA reporting requirements provide short-term relief from these penalties. For reports files in 2016 (for 2015 calendar year info), the IRS will not impose penalties on ALE members that can show they made a “good-faith effort” to comply with the information reporting requirements. Specifically, relief is provided for incorrect or incomplete info reported on the return or statement, including Social Security numbers, but not for failing to file timely.