Summary: Employers are slated to receive welcome and much-needed relief from Affordable Care Act (ACA) reporting requirements with the passage of two Congressional bills:
- Paperwork Burden Reduction Act (H.R. 3797)
- Employer Reporting Improvement Act (H.R. 3801).
Both bills were first passed by the House of Representatives, on June 21, 2023, on a bipartisan basis, then subsequently passed by the Senate on December 10, 2024. They are both now waiting for President Biden’s signature, who is anticipated to sign these bills very shortly (as of the publication date of this article).
H.R. 3801 and H.R. 3797 are both effective for ACA reporting forms with respect to the 2024 taxable year, due after December 31, 2024, in early 2025.
Read on for key highlights of both bills as well as employer next steps once they are enacted into law.
ACA Reporting Background
The Affordable Care Act (ACA) created reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056.
- Section 6055 applies to providers of minimum essential coverage, such as employers with self-insured health plans (and health insurance carriers). These entities use Forms 1094-B and 1095-B to report information about the coverage they provided during the previous year.
- Section 6056 applies to ALEs (see below). ALEs use Forms 1094-C and 1095-C to report information relating to the health coverage that they offer (or do not offer) to their full-time employees.
These reporting requirements provide the IRS with information to administer the employer shared responsibility payment (ESRP or “pay-or-play”) rules, which impose penalties on applicable large employers (ALEs) that do not offer affordable, minimum value coverage to their full-time employees. It also provides information to help employees determine whether they are eligible for a premium tax credit for coverage purchased through an ACA Exchange (or Marketplace). Click here for a Risk Strategies article detailing the ACA pay-or-play penalties for 2025.
Applicable Large Employer (ALE):
An applicable large employer (ALE) is one with at least 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year.
Full-time employee generally means an employee who averages 30 or more hours of service per week.
Related Employers
ALEs include all related employers within the same controlled group.*
Note: Although related employers are combined to determine ALE status, each entity is separately responsible for the ACA pay-or-play requirements. Penalties assessed on one entity do not apply to other entities in the controlled group.
*Controlled group definition under Internal Revenue Code §414 generally includes parent-subsidiary groups, brother-sister groups, nonprofit organizations under common control, trades, and businesses under common control.
ALEs with self-funded plans use a combined reporting method by filing Forms 1094-C and 1095-C (see table directly below).
Refer to the table below for a refresher summary of ACA reporting requirements:
|
Employer Size & Plan Type
|
Reporting Entity
|
IRS Transmittal Form
|
IRS Return
|
Individual Statement
|
|
ALE with fully insured group health plan (50 or more full-time employees)
|
Health insurance carrier
|
Form 1094-B
|
Form 1095-B
|
Form 1095-B
|
|
Employer
|
Form 1094-C
|
Form 1095-C
|
Form 1095-C
|
|
ALE with self-funded/level-funded group health plan (50 or more full-time employees)
|
Employer
|
Form 1094-C
|
Form 1095-C
|
Form 1095-C
|
|
Non-ALE with fully insured group health plan (1-49 full-time employees)
|
Health insurance carrier
|
Form 1094-B
|
Form 1095-B
|
Form 1095-B
|
|
Non-ALE with self-funded/level-funded group health plan health plan (1-49 full-time employees)
|
Employer
|
Form 1094-B
|
Form 1095-B
|
Form 1095-B
|
ACA Reporting Deadlines
The deadlines for 2024 ACA reporting are outlined in the table below:
|
Deadline
|
ACA Reporting Requirement
|
Employer Actions
|
|
March 3, 2025*
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Forms provided to full-time employees/other individuals (e.g., part-time employees, retirees, COBRA enrollees)
|
ALEs and non-ALEs who offer self-funded/level-funded plans must distribute Forms 1095 to employees by March 3, 2025.
|
|
March 31, 2025
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File Forms 1094 and Forms 1095 electronically** with the IRS
|
ALEs and non-ALEs who offer self-funded/level-funded plans must electronically file Forms 1095 and 1094 to the IRS by March 31, 2025.
|
*Although the 30-day extended deadline is typically March 2 of each year, the deadline for the 2024 calendar year is March 3, 2025, since March 2, 2025 falls on a Sunday.
** Employers must aggregate all tax information returns and are required to electronically file all tax information forms, including Forms 1095, if that number exceeds 10. Click here for a Risk Strategies article with more information.
Paperwork Burden Reduction Act (H.R. 3797)
The name of H.R. 3797 (Paperwork Burden Reduction Act) reflects the spirit of the relief provided here by reducing the administrative burden of ACA reporting-related paperwork.
Currently, employers (and health insurance providers) that provide minimum essential coverage must report this information for each covered individual to the Internal Revenue Service (IRS) and provide a copy of this information to the covered individual (through Forms 1095-B and 1095-C) by March 2 of each year (permanently extended from initial January 31 deadline. Click here for a previous Risk Strategies article for more details).
The IRS permits Forms 1095-B, which are sent by certain employers (and health insurance providers), to be made available to individuals only upon request, via an “alternative method.”
“Alternative Method” for ACA reporting forms
Final regulations published in late 2022 (detailed here) permits certain ACA reporting entities to use an “alternative method” for furnishing Forms 1095-B and 1095-C to certain plan participants. The ACA reporting entities that may use this alternative method include:
- Non-ALE self-funded/level-funded plan sponsors and health insurance providers that send Form 1095-B to their plan participants (as proof of minimum essential coverage).
- ALE self-funded plan sponsors that send Form 1095-C to their plan participants who are part-time employees and non-employees (such as COBRA participants or retirees).
IMPORTANT NOTE: ALE sponsoring self-funded group health plan cannot currently rely on this alternative method to furnish Form 1095-C to their full-time employees, since Form 1095-C also provides affordability and minimum-value information applicable to a full-time employee’s eligibility for a premium tax credit.
This “alternative method” requires these ACA reporting entities to:
- Post a clear and conspicuous notice on its website and retain in the same location until October 15 of the next plan year. The notice must include an email address, a mailing address, and a telephone number for individuals to contact with questions along with informing these individuals how they may request a copy of their individual Form. The notice must be written in plain, non-technical terms and in a font size large enough to signal to the reader that the information pertains to health coverage tax statements.
The final regulations provide a "safe harbor" example for reporting entities to satisfy this notice requirement (as outlined in the paragraph directly above) by also including a statement or link on the main website page with the words “Tax Information,” which links to a secondary webpage with the words "IMPORTANT HEALTH COVERAGE TAX DOCUMENTS" in capital letters.
- Provide the individual Form 1095-B or 1095-C within 30 days when requested by a plan participant. The form may be provided electronically if the requesting participant consents to electronic receipt.
This alternative method is intended to reduce the administrative burden of ACA reporting for any tax years that the individual mandate is $0 (as is the case currently) since these forms are not required for these individuals to file their tax returns. This provision is subject to change if the individual mandate changes from $0 (which will happen automatically at the end of 2025 absent further Congressional action when the Tax Cuts and Jobs Act sunsets).
This provision of H.R. 3797 formally codifies existing ACA reporting regulations providing the “alternative method” flexibility for Forms 1095-B and extends this flexibility to Forms 1095-C provided to full-time employees of ALEs sponsoring self-funded group health plans.
H.R. 3797 applies to Forms 1095-B and 1095-C for calendar years after 2023. Practically, this means that for the 2024 taxable year, employers will be able to leverage the alternative method outlined above, not only for Forms 1095-B (as currently permitted) but also for Forms 1095-C for full-time employees of ALEs sponsoring self-funded plans, potentially saving costs, time, and resources.
The deadlines for 2024 ACA reporting are outlined in the table above.
Employer Reporting Improvement Act (H.R. 3801)
H.R. 3801 contains four key provisions of relevance to employers detailed below, all of which are expected to reduce ACA reporting-related administrative burdens:
- Taxpayer Identification Number (TIN) Reporting Flexibility:
Currently, ALEs (and health insurance providers) that provide minimum essential coverage must report this information for each covered individual to the IRS, including the covered individual's Tax Identification Number (TIN).
Employers and providers must also send a copy of this information to the covered individual (through 1095-B and 1095-C tax forms) by March 2 of each year (permanently extended from the initial January 31 deadline. Click here for a previous Risk Strategies article for more details.
This provision of H.R. 3801 formally codifies existing ACA reporting regulations, providing flexibility to streamline ACA reporting and a measure of privacy protection by substituting a date of birth for a covered individual if the TIN is not available or an ALE is unable to collect the covered individuals’ TIN.
- Electronic Delivery of Forms 1095-B and 1095-C:
The IRS permits ALEs to provide Forms 1095-B and 1095-C electronically with an individual’s consent. Note that an individual may revoke such consent in writing at any time.
This electronic delivery provision of H.R. 3801 also formally codifies existing ACA reporting regulations to electronically provide Forms 1095-B and 1095-C with an individual’s consent.
- Additional Time to Respond to IRS Letter 226-J:
Letter 226-J is the initial letter issued to ALEs by the IRS to notify them of a potential ESRP assessment. The determination of whether an ALE may be liable for an ESRP and the amount of the proposed ESRP in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees.
Currently, ALEs are required to respond generally within 30 days of the Letter 226-J date, which is often a tight timeframe to collect and review applicable ACA reporting forms, and craft a response.
This provision of H.R. 3801 will provide additional time of at least 90 days to respond to these letters.
Practically, this provision provides welcome relief for ALEs, particularly small businesses with limited resources. ALEs will now have 90 days, rather than the current 30 days, to collect and review applicable ACA reporting forms, and respond to Letter 226-J.
- Statute of Limitations for Penalty Assessments under Section 4980H
H.R. 3801 establishes a six-year statute of limitations for the IRS to collect ESRP assessments. Currently, there is no statute of limitations on ESRP assessments.
This provision of H.R. 3801 is another welcome relief measure for ALEs, providing a modicum of predictability for financial planning and budgeting purposes.
The IRS will now be limited to six years in which it may potentially scrutinize prior year ACA reporting forms and collect any ESRP assessments.
Since H.R. 3801 is effective for tax plan years after December 31, 2024, the IRS can issue Letter 226-J with potential ESRP assessments going back to the 2019 taxable year and later.
Employer Next Steps
Both of these Congressional bills easing ACA reporting requirements for employers arrive at an opportune time as ACA reporting season for the 2024 taxable year is about to begin in earnest. The 2024 ACA reporting season marks the 10th year of ACA reporting requirements.
Once these bills are signed by the President and enacted into law, employers are advised to liaise with their ACA reporting vendors regarding these reporting-related changes and determine how the vendors will support employers for the 2024 ACA reporting season.
NOTE: Employers with employees residing in certain states and localities (namely California, Massachusetts, New Jersey, Rhode Island, and Washington, D.C.) with their own health coverage reporting requirements are advised to monitor for additional state/local guidance on how these federal ACA reporting changes will impact applicable state/local reporting requirements.
Risk Strategies is following these developments closely and will provide updates when available. Contact your Risk Strategies account team with any questions or contact us directly here.
