There have been several legislative developments with the Affordable Care Act (ACA) in the past month. Most recently, President Trump issued executive orders that affect the enrollment process and medical insurance coverage for an estimated 24 million people.
The changes impact key provisions, including enrollment deadlines, eligibility criteria and federal subsidies. This could result in reduced access to affordable healthcare for many Americans, a cornerstone of the popular healthcare law.
Trump also signed an executive order reviving a previous order concerning the ACA’s individual mandate, which no longer exists.
Those changes, however, have no impact on ACA compliance. Two pieces of legislation from December — the Employer Reporting and Improvement Act and Paperwork Burden Reduction Act — do. Below, we break down each law, what they entail, and how they affect compliance.
Employer Reporting and Improvement Act
The Employer Reporting and Improvement Act introduces more comprehensive compliance changes between the two laws. Below is a summary of the changes for Applicable Large Employers (ALEs):
- Letter 226J response timing. ALEs now have 90 days to respond to Employer Shared Responsibility Penalty notices in Letter 226J. The prior IRS standard was 30 days.
- Statute of limitations. The law establishes a six-year statute of limitations on the IRS for returns due after Dec. 31, 2024, for assessing employer shared responsibility payments. The limit begins to run on the later of the due date for the underlying form or the date the return is actually filed. Under prior law, there was no statute of limitations.
- Electronic delivery. ALEs may furnish any requested ACA forms to individuals electronically, provided the individual has consented to and not revoked their consent to electronic delivery. Forms must be provided on paper to individuals who have not consented to electronic delivery.
- Taxpayer identification number reporting. Historically, the ACA forms generally required disclosure of each covered person’s social security number (SSN) or tax identification number (TIN). The new law allows ALEs to substitute a birthdate in instances where an SSN or TIN is unavailable. This provision of the law codifies existing IRS practice.
Paperwork Burden Reduction Act
The Paperwork Reduction Act amends Section 6056 of the Internal Revenue Code, which obligates ALEs and health insurers (carriers) to prepare and furnish Forms 1095-C/1095-B to employees. ALEs are no longer required to mail forms to employees if they meet certain requirements.
Employers can instead opt to provide these forms only upon employee request, provided they meet certain conditions:
- Employee notification: Employers must provide clear, conspicuous, and accessible notice to employees, informing them of their right to request Form 1095-C. The IRS may provide specific guidelines on the timing and manner of this notification.
- Update: IRS guidance states that for the 2024 tax year employers must post the notice by March 3 and it must remain on the company website until Oct. 15.
- Timely furnishing upon request: Upon receiving a request, employers must furnish the employees Form 1095-C by the later of:
- Jan. 31 of the year following the calendar year in which coverage was provided, or
- 30 days after the date of the request, whichever is later.
Challenges and Considerations for Employers
The Employer Reporting and Improvement Act provides some much-needed clarity and simplification. There is an established statute of limitations where there previously was none. Additionally, the new 90-day Letter 226J response time sets a firm, realistic timeline where the previous 30-day standard was arbitrary and led to extension requests that were typically granted.
The Paperwork Burden Reduction Act, meanwhile, appears to lessen the burden of compliance on the surface. However, it has the potential to introduce significant compliance challenges. A few complications that could arise include:
- Tracking issues: If employees request their 1095-C form, how will you keep track of those instances? Without a formalized furnishing process in place, you risk data inconsistencies over time. The burden of proof falls on the employer to establish compliance for seven years after a form has been furnished.
- State ACA requirements: If an employee lives in or moves to a state with its own ACA requirements and never received a 1095-C form during a specific tax year, you could be out of compliance with that state’s furnishing requirements. Of the four jurisdictions — California, New Jersey, Rhode Island, and Washington D.C. — that have implemented their own individual mandate and separate Employer ACA filing and furnishing requirements, only one, Washington D.C., has specific guidance that says compliance with federal distribution standards satisfies that jurisdiction’s furnishing requirement.
- Employee turnover: Every employer has turnover. If you utilize the “upon request” method, it becomes more difficult to track and manage when 1095-C forms were furnished and to whom, which becomes an unnecessary compliance risk over time.
The deadline for furnishing Form 1095-C to employees for the 2024 tax year is March 3. To comply with the new furnishing requirements, employers have three options:
- Print and mail 1095-C forms
- e-Distribute forms (with employee consent)
- Furnish 1095-C forms only upon request, ensuring proper notifications are in place
And if you are an ALE operating in a state with its own ACA reporting requirement (California, New Jersey and Rhode Island), you still must comply with standard furnishing requirements and deadlines in those jurisdictions.
How Trusaic Simplifies Compliance
Trusaic’s ACA compliance service enables you to offload 1095-C furnishing and filing responsibilities. Our designated support team prepares and distributes your 1095-C forms on-time to applicable employees by U.S. mail or electronically on demand.
Given the new legislation, we offer our clients two options to choose from:
- e-Distribution + Print and Mail (CA, RI, NJ only)
- Print and Mail only
Option 1 is our recommended approach and organizations can e-distribute with ease utilizing Trusaic’s platform. Our e-distribution platform makes it easy for an employer to notify their employees of the option to receive their forms while providing them with a link where they can access the form electronically.
This also simplifies any employee follow-up requests for a form as the employer can simply resend the link to their employee giving them digital access to their forms. This ensures all your forms are distributed on-time and can be easily tracked for compliance purposes.
Book a meeting to learn how other companies are adopting this approach to Form 1095-C furnishing.
