Important Updates for ACA Reporting and State Reporting Reminders (Benefit Minute)
This Benefit Minute provides information on recent IRS guidance on Form 1095-B and Form 1095-C reporting, as well as reminders for reporting to states that are enforcing health insurance individual mandates.
Proposed Regulation for ACA Reporting
The IRS has published a proposed regulation that, if finalized, will ease some of the requirements imposed on insurers and employers when reporting offers of and enrollment in minimum essential health coverage. At the same time, the IRS has reiterated that good faith relief for inaccurate or incomplete reporting has ended. The deadline for filing forms with the IRS remains March 31 if filed electronically (applicable in most cases) or February 28 if filed on paper.
The regulation includes the following:
- Form 1095-C: Applicable large employers (ALEs) who are required to provide a Form 1095-C to all full-time employees (as defined by the ACA) will be granted a permanent extension of time to furnish the forms. The January 31 deadline is extended by 30 days (generally March 2 or March 1 in a leap year). If the extended date is a weekend or legal holiday, it moves forward to the next business day. The upcoming deadline is March 2, 2022.
- Form 1095-B: Health insurers and small employers with self-insured plans who are required to provide a Form 1095-B to covered individuals will be granted a permanent extension of time to furnish the forms. The January 31 deadline is extended by 30 days as above. The upcoming deadline is March 2, 2022.
- Form 1095-B: For as long as the federal individual mandate penalty is zero, issuers of Form 1095-B may use an alternative manner to furnish Form 1095-B (in lieu of mailing to all covered individuals or providing electronically with consent). The alternative manner to furnish Form 1095-B may not be available if the employee resides in a state that has its own individual health insurance mandate (see more information below). Under the alternative manner, the reporting entity must:
- post a clear and conspicuous notice on the entity’s website stating that individuals may receive a copy of Form 1095-B upon request. The notice must be written in plain non-technical terms and with letters of a font size large enough to alert an individual that the information pertains to tax statements reporting the individual had health coverage
- include in the notice an email address, physical address to which a request may be sent, and a telephone number that may be used by an individual to contact the reporting entity with any questions
- retain the notice on the website until October 15 of following calendar year
- End of good faith relief: For reporting periods through 2020, the IRS had granted relief from ACA penalties for Form 1095-B and Form 1095-C reporting errors if it could be shown that a good faith effort was made to comply with the reporting requirements. The reporting requirements have been in place for 6 years, so the IRS has determined that transitional relief is no longer appropriate. Therefore, good faith relief for reporting incorrect or incomplete information on Form 1095-B and Form 1095-C will not be available for 2021 and subsequent years. A reasonable cause exception may still be available if a reporting entity has reasonable cause for failing to timely or accurately complete their reporting requirements.
This regulation, if finalized, will apply to reporting for the 2022 calendar year (Forms 1095-B and Forms 1095-C furnished in 2023). However, the proposed regulation may be relied on for reporting for the 2021 calendar year (to be furnished in 2022).
Expansion of Mandatory Electronic Reporting
The IRS has issued a proposed regulation that would expand mandatory electronic filing of information returns. For Forms 1094-C and 1095-C, the new threshold for electronic filing was supposed to be 100 returns for due dates during calendar year 2022 and 10 returns for subsequent calendar years. To calculate these thresholds, the proposed regulation also requires aggregation of most information returns, instead of the employer looking at the number of each type of information return separately to determine if electronic filing is required. This proposed regulation has not been finalized and, until then, the IRS has stated that the threshold will remain at 250 returns (each type of return, not in the aggregate).
States with Health Insurance Individual Mandates
In 2021, five states and the District of Columbia require their residents to maintain health insurance coverage.
- Massachusetts – residents are required to have health coverage that meets specific standards (Minimum Creditable Coverage or MCC) or pay a state tax penalty. Insurers or employers that provide health coverage are required to provide a Form 1099-HC to employees in Massachusetts by January 31 of each year and file them electronically with the Department of Revenue as proof of MCC coverage.
- District of Columbia – residents must maintain minimum essential coverage (MEC) or pay a tax penalty. DC requires an entity that provides MEC to a DC resident to electronically submit Form 1095-B and Form 1095-C to the DC Office of Tax and Revenue through MyTax.DC.gov. This includes employers sponsoring fully insured plans, insurers, and sponsors of self-insured plans. DC states that compliance with the IRS requirement to furnish Form 1095-B or Form 1095-C to individuals is sufficient.
- New Jersey – residents must maintain MEC or pay a tax penalty. New Jersey requires an entity that provides MEC to a resident to electronically submit Form 1095-B (fully insured and non-ALE self-insured) or Form 1095-C (ALE self-insured) via the NJ Division of Revenue and Enterprises Services’ MFT SecureTransport service. Participant statements must be provided, but furnishing the Form 1095-B or Form 1095-C satisfies this requirement.
- California – residents must maintain MEC or pay a tax penalty. California requires an entity that provides MEC to a resident to submit Form 1095-B (fully insured and non-ALE self-insured) or Form 1095-C (ALE self-insured) to the state’s Franchise Tax Board. Participant statements must be provided by January 31.
- Rhode Island – residents must maintain MEC or pay a tax penalty. Rhode Island requires an entity that provides MEC to a resident during the calendar year to submit Form 1095-B (fully insured and non-ALE self-insured) or Form 1095-C (ALE self-insured) to the state’s Division of Taxation. There are 2 options for electronic filing, including upload of a csv file. Participant statements must be provided by January 31.
- Vermont – residents are required to have MEC, but lawmakers were unable to agree on a tax penalty (so there is none). There also appears to be no insurer or employer reporting obligations at the current time.