ACA Simplified Employer Reporting Changes Signed Into Law

December 30, 2024

Two new Affordable Care Act (ACA) employer reporting changes have been signed into law by the President. While the new rules do not significantly change existing employer reporting requirements, they do provide opportunities for employers to streamline some ACA reporting processes and reduce administrative burdens. The two new laws summarized below are effective for the current returns due in early 2025 for the 2024 reporting year.

Employer Reporting Improvement Act
This Act modifies ACA provisions that require employers and health insurance providers to prepare tax forms showing proof of minimum essential coverage or “MEC” (1095-B and 1095-C tax forms). Currently, employers and health insurance providers that provide MEC must report this information for each covered individual to the IRS, including the covered individual’s Tax Identification Number (TIN/social security number). Employers and providers must also send a copy of this information to the covered individual (through 1095-B and 1095-C tax forms) by January 31 of each year (extended to March 3, 2025 for the 2024 reporting year). Additionally, under current law, large employers (generally those with 50 or more full-time employees) are subject to an assessment by the IRS if they do not offer affordable MEC. Changes made to streamline these processes are as follows:

• Reporting for self-insured plans and insurers: The Act provides statutory authority for an individual’s date of birth to be substituted for the individual’s social security number (TIN/SSN) if the TIN/SSN is not available (with no need to establish reasonable cause), and for employers and providers to offer 1095-B and 1095-C tax forms to individuals electronically.
• Enforcement Timelines for Letter 226J Assessments: The Act requires the IRS to give an employer at least 90 days to respond after sending its first Letter 226J about a proposed assessment (previously the IRS generally gave 30 days to respond before the IRS takes further action.) In addition, there is now a 6-year statute of limitations on the IRS ability to impose such penalties (previously there wasn’t a formal statute of limitations).

Paperwork Burden Reduction Act
This Act modifies ACA provisions so that employers and health insurance providers are no longer required to send tax forms to covered individuals showing proof of MEC (1095-B and 1095-C tax forms) unless a form is requested. Currently, employers and health insurance providers that provide MEC must report this information for each covered individual to the IRS and provide a copy of this information to the covered individual (through 1095-B and 1095-C tax forms) by January 31 of each year (extended to March 3, 2025 for the 2024 reporting year). Changes made to streamline these processes are as follows:

• Form 1095 Distribution: The Act provides statutory authority allowing for 1095-B tax forms, which are sent by certain health insurance providers and employers, to be made available to individuals only upon request. The Act also extends this to 1095-C tax forms, which are sent by certain large employers. Employers can now choose to satisfy distribution requirements for 1095-B and 1095-C tax forms by posting a notice of availability that is “clear, conspicuous, and accessible” that the forms are available upon request. The forms must be distributed upon request of the individual by the later of January 31 (or the extended due date) or 30 days after the date of the request.
• Timely Notice Required: Employers and health insurance providers must give individuals timely notice of this option, in accordance with any requirements set by the IRS. The IRS is expected to provide further guidance regarding what is needed to satisfy the notice requirement.

State Reporting Requirements Continue
The changes addressed in this Update affect federal ACA employer reporting requirements. Employers with employees in states that have their own reporting requirements (CA, MA, NJ, RI, DC) should make note that they may not benefit from this relief for the 2024 reporting year and should stay informed on how these federal ACA reporting changes may impact applicable state/local reporting requirements.

Next Steps for Employers

1. Review ACA reporting responsibilities (see this IRS webpage for details on the employer mandate and reporting, and the pay or play penalty assessment process):

• All applicable large employers (ALEs) – those with 50 or more full-time equivalents – are required to report on offers of coverage to full-time employees. ALEs report offers of coverage information using Forms 1094-C and 1095-C.
• In addition, any size employer who provided level-funded or self-funded group health plan coverage during 2024 must report coverage information for all individuals enrolled in the plan, including employees, non-employees (e.g., retirees, COBRA participants, owners), and their spouses and dependents. ALEs generally report this information on Form 1095-C at Part III. Small employers (those with fewer than 50 full-time equivalents) report this information using Forms 1094-B and 1095-B.
• The IRS instructions for 2024 reporting indicate that Forms 1095 must be distributed to FTEs and covered individuals by March 3, 2025, and Form 1094 along with all Form 1095s must be submitted electronically to the IRS by March 31, 2025. Failure to report complete, accurate, timely information can result in significant reporting penalties.

2. Consider new streamlined/optional reporting opportunities starting with the 2024 calendar year reporting:

• As an alternative to automatically sending the 1095-C and 1095-B forms to individuals by mail or electronically, employers may now post a notice of availability to avoid this automatic distribution to individuals. The Form must be provided upon request by the later of January 31 (extended to March 3, 2025 for the 2024 reporting year) or 30 days after the request.
• Update employee communications to inform employees about the new distribution method and ensure the notice meets the IRS requirements. We expect to shortly receive IRS guidance addressing the notice requirement, but in the meantime the 2024 IRS Instructions for 1094/5-B at page 5 indicate the notice of availability for the Form 1095s should be posted on the employer’s website (or perhaps a benefits portal) with an email address, physical mailing address, and telephone number that can be used to request a copy.
• Monitor IRS guidance and stay informed on any additional information from the IRS regarding these optional reporting opportunities.

3. Contact ACA reporting vendors regarding these reporting-related changes to determine how they will support employers with these optional reporting opportunities for the 2024 ACA reporting season.

Employers can choose to implement these changes in order to streamline some of their ACA reporting processes and reduce certain administrative burdens. Your Conner Strong & Buckelew account team will work with you to stay informed and understand these new optional reporting opportunities. We will also keep our clients updated on subsequent IRS guidance on the notice requirements for the new distribution methods. Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.