IRS Issues New Proposed Rules for ACA Reporting: Some Good News and Some Bad News

In late November, the Department of Treasury released proposed regulations regarding the Section 6055 and 6056 Employer Reporting requirement under the Affordable Care Act (ACA). The regulations added a proposed permanent extension to distributing 1095 forms to individuals, but also upheld a more stringent requirement around the accuracy of ACA form filings to individuals and the IRS.

Form Furnishing Deadline Relief
Since the 2015 calendar year, the Affordable Care Act has required certain entities (employers with 50 or more FTEs or any self-funded employer) to complete Information Reporting on behalf of applicable individuals – with a deadline to furnish forms to individuals by January 31st each year. In the six years that the reporting requirement has applied, the Departments have always extended the January 31st furnishing deadline, most commonly by 30 days.

The recent regulations propose a permanent extension of the deadline for furnishing forms to individuals to 30 days after January 31st, generally March 2nd . If the new due date falls on a weekend day or holiday, statements are due to be furnished to individuals on the following business day. As such, entities are required to furnish the 2021 1095 forms to applicable individuals by March 2nd, 2022.

Suspension of “Good Faith” Relief
When ACA reporting initially began, the IRS confirmed it would not enforce penalties in cases where inaccurate or incomplete information was filed, as long as the filing entity showed it made a “good faith” effort to accurately complete the form. In the recent past, the IRS had stated that they were looking to phase out this “good faith” relief, and the recent regulations confirmed it will not be granted for 2021 filings.

As a result, applicable entities could face significant penalties for inaccurate or incomplete form filings. In 2021, employers could face a penalty of $280 per form for an incorrect form filing with the IRS, even if forms were distributed to employees on a timely basis. It is unknown how strictly the IRS may enforce these penalties, but it’s likely the following issues could cause the IRS to levy costly penalties against employers:

  • Incorrect reporting codes on lines 14 or 16 of the 1095-C
  • Incorrect or incomplete social security numbers or dates of birth for employees/dependents
  • Inaccurate information on an employer’s 1094-C form

Employers are strongly encouraged review their ACA Form filing process for any issues that could trigger IRS penalties due to inaccurate or incomplete form flings. Conrad Siegel is available to answer questions or assist groups with respect to ACA filings in 2021.

Please feel free to direct any questions regarding ACA Reporting to our team.

Our health and welfare compliance updates are designed to provide useful information to organizations about the operation and management of their employee benefit plans. Although we go to great lengths to ensure that only accurate and timely information is provided, we recommend that you consult with an attorney for professional assurance that our information, and your interpretation of it, is appropriate for your particular situation. Nothing provided herein should be construed as legal or tax advice.