Two new federal laws passed at the end of 2024 bring welcomed updates to benefit plan sponsors. Under the Employer Reporting Improvement Act (ERIA) and the Paperwork Burden Reduction Act (PBRA) plan sponsors are no longer required to distribute Forms 1095-B and 1095-C to all covered individuals. The laws also offer employers new protections related to employer shared responsibility (ESR) penalty assessments.
Key Changes
Reporting Individual Coverage Information
The ERIA now allows employers and health insurance providers to submit spouses’ and dependents’ names and date of birth in lieu of their Tax Identification Number (TIN) on Form 1095-B and 1095-C filings if the TIN is not available.
Distribution of Forms 1095-B and 1095-C Upon Request
The PBRA no longer requires employers and health insurance providers to distribute Forms 1095-B and 1095-C to all covered individuals, so long as certain conditions are met. Beginning with 2024 returns, the PBRA permits employers to meet the ACA’s furnishing requirement by:
- Providing “clear, conspicuous, and accessible notice” that any person who would otherwise be entitled to receive a copy of Form 1095-B or Form 1095-C may request a copy of the applicable form.
- Providing a copy of the form to any individual who requests it within 30 days of the request or, if later, by January 31 of the year following the reporting year.
The PBRA does not change the distribution requirements for states or jurisdictions with an individual health insurance mandate, including California, Massachusetts, New Jersey, Rhode Island, and Washington D.C.
- California: Forms 1095-B and 1095-C must be provided to employees by January 31 following the end of the plan The forms must be filed by March 31; however, no penalty will be imposed for forms filed by May 31.
- Massachusetts: Employers are responsible for issuing Form MA 1099-HC to employees no later than January 31 following the end of the plan year, but this is typically handled by carriers or third-party administrators. Be sure to check with your carrier or TPA concerning the furnishing of documents.
- New Jersey: Forms 1095-B and 1095-C must be provided to employees by March 3 following the end of the plan year and the forms must be filed by March 31.
- Rhode Island: Forms 1095-B and 1095-C must be provided to employees by March 3 following the end of the plan year and the forms must be filed by March 31.
- Washington C. does not require covered employers to furnish an additional annual statement of health coverage and has stated that compliance with the IRS requirements is sufficient.
Electronic Distribution of Forms
The ERIA allows employers and providers to electronically distribute Forms 1095-B and 1095-C to covered individuals. This codification of existing IRS practices helps streamline processes and reduce administrative costs associated with mailing the forms to employees.
Extended Response Time for Proposed IRS Assessments
The ERIA extends the response period for initial IRS proposed ESR penalty assessments from 30 days to 90 days. This added time provides employers with a more reasonable window to address discrepancies and respond to proposed penalties. It also alleviates the necessity of extension requests, which the IRS had been routinely granting.
Statute of Limitations on IRS Assessments
For Forms 1095-C that are due in 2025 or future years, the ERIA requires the IRS to assess ESR payments within six years of the later of the employer’s due date for filing a Form 1095-C with the IRS or the date the return was actually filed.
However, this change only applies prospectively, so employers may still receive penalty assessments beyond the six-year statute of limitations for coverage failures tied to returns due in 2024 or prior years.
Employer Action Items
- Implement notice procedures. Establish a process to provide “clear, conspicuous, and accessible” notices about the availability of Forms 1095-B and 1095-C upon request, and train relevant staff to respond to requests within 30 days or by January 31, whichever is later.
- Streamline electronic distribution. Transition to electronic distribution of Forms 1095-B and 1095-C to reduce mailing costs, ensuring compliance with any applicable consent requirements including by drafting a consent form and obtaining employees’ consent to electronic distribution.
- Monitor state-specific requirements. Stay compliant with state-specific reporting mandates for jurisdictions with individual health insurance mandates and coordinate with carriers or TPAs as needed.
- Know your new protections. If you are an ALE, the changes under the ERIA give you more time (90 days) to respond to IRS Letter 226-J and require the IRS to assess ESR penalty payments within a six-year statute of limitations.