IRS Proposed Regulations Extend ACA Reporting Deadlines and Other Changes

On November 22, 2021, the IRS released proposed regulations providing employers an automatic 30-day extension of the deadline to furnish individual statements for the Forms 1095-B and 1095-C (the “Forms”) under the Affordable Care Act (ACA) along with several additional changes to ACA reporting requirements.

Automatic 30-Day Extension of Forms Deadline to Individuals

Once the proposed regulations are finalized, the provisions would take effect for the 2022 calendar year. However, the IRS confirmed that employers may rely on these proposed regulations for the Forms to individuals due in 2022 for the 2021 calendar year. As such, the deadline for 2021 Forms furnished to individuals is automatically extended from January 31, 2022 to March 2, 2022.

The IRS has repeatedly extended the deadline to furnish the Forms to individuals for the past six years of ACA reporting obligations. These proposed regulations would permanently extend the deadline for the Forms furnished to individuals to March 2 (or the next business day if landing on a weekend or holiday).

Note that the deadline for submitting the Forms to the IRS remains the same - February 28 (for paper filing) and March 31 (for electronic filing).

Alternative Method of Furnishing Forms to Certain Individuals

The proposed regulations also permit an alternative method for furnishing the Forms to certain health plan participants, namely part-time employees and non-employees (such as COBRA enrollees or retirees) of an Applicable Large Employer (ALE) with a self-insured group health plan as long as the following two conditions are satisfied:

1. The ALE is required to post a notice prominently on its website until October 15 of the next plan year, informing these individuals that they may request a copy of their individual statement. The notice must include an email address, a mailing address, and a telephone number for individuals to contact with questions.

2. The ALE is required to provide the individual statement within 30 days of the request.

This alternative method is intended to reduce the administrative burden of ACA reporting for as long as the individual mandate is $0 (as it is currently) since the 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. ALEs with self-insured group health plans cannot rely on this alternative method to furnish Forms to its full-time employees.

Elimination of Transitional Good Faith Relief:

The IRS granted transitional good faith relief by not imposing penalties for incorrect or incomplete statements for all years of ACA reporting obligations to date if employers could show that they made good faith efforts to comply with the reporting requirements. The transitional good faith relief covered incorrect or incomplete information, including missing and inaccurate taxpayer identification numbers or dates of birth, reported on the statements.

However, the IRS stated previously that 2020 was the last year that this transitional good faith relief would be provided. As such, the proposed regulations confirm the elimination of this relief for the 2021 plan year and subsequent years is no longer available. This change could result in large penalties for incorrect or incomplete Forms ($280 per return). Nonetheless, employers who can show reasonable cause for failure to timely or accurately complete their ACA reporting requirements may still be eligible for penalty relief under the standard for a reasonable-cause waiver pursuant to IRC Section 6724.

As a result of the elimination of transitional good faith relief for the 2021 plan year, employers are strongly encouraged to review their 2021 Forms very carefully to ensure accuracy and completeness in an effort to avoid penalties.

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