Proposed Legislation to Ease ACA Reporting Burdens Passes House

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On June 21, 2023, the House passed H.R. 3801, also known as the Employer Reporting Improvement Act, which is intended to ease some of the burdens employers and insurance carriers face related to the annual Form 1094 and Form 1095 reporting requirements under the Affordable Care Act (“ACA”). The House also H.R. 3797, also known as the Paperwork Burden Reduction Act, which would allow reporting entities to provide notice of the availability of Forms 1095-C on its website rather than having to mail copies to every individual. While the bills have successfully passed the House, they still must pass the Senate and be signed into law by the President prior to becoming effective.

Background

Under the ACA’s employer shared responsibility rules, applicable large employers (“ALEs”) generally must offer the opportunity to enroll in minimum essential coverage (“MEC”) that meets the affordability or minimum value (“MV”) requirements to more than 95% of their full-time employees. If an ALE fails to do so and any of their full-time employees purchase health insurance through the marketplace and receive premium tax credits, then the employer will be subject to excise taxes under Code Section 4980H (also known as “Employer Shared Responsibility Payments” or “ESRPs”).

In order to avoid ESRPs, an ALE must use Forms 1094-C and 1095-C to report information required under Code Sections 6055 and 6056 about its offer of employer-sponsored health coverage to its full-time employees and the employees’ enrollment in such coverage. The IRS uses these forms to assess ESRPs. For fully insured plans, insurance companies use Form 1095-B to inform employees about their health coverage. ALEs that provide coverage solely through fully insured plans still must complete Forms 1094-C and 1095-C, but they need not complete Part III of Form 1095-C.

What Do the New Bills Provide?

H.R. 3801, if passed, would amend Code Sections 6055(b)(1) and 6056(c) to codify certain flexibilities that already exist under the regulations. One such flexibility allows reporting entities to substitute a covered individual’s date of birth in place of a missing SSN/TIN on Form 1095-B, and Part III of Form 1095-C. The other allows consent for electronic delivery of Forms 1095-B and 1095-C to be in place indefinitely, until revoked by the recipient. These changes would be effective for returns due after December 31, 2024. H.R. 3801 also would give ALEs 90 days, rather than the current 30 days, to respond to a Letter 226-J from the IRS. Letter 226-J is the initial letter the IRS issues to ALEs to notify them that they may be liable for an ESRP. This would provide a more reasonable period for an employer to respond to a Letter 226-J. This change would be effective for ESRP assessments proposed in tax years beginning after the date of the bill’s enactment.

Lastly, H.R. 3801 would establish a six-year statute of limitations for the IRS to assess ESRPs. The limitations period would begin to run on the due date for filing Forms 1094-C and 1095-C or, if later, the date the returns are actually filed. This would be effective for returns due after December 31, 2024. The IRS’s current position is that there is no statute of limitations under Code Section 4980H. This would implement a clear cut-off point after which the IRS could no longer attempt to assess ESPRs, but it would mean that the limitations period might still be unlimited if an ALE fails to file returns for a given year.

H.R. 3797, if passed, would amend Code Sections 6055(c) and 6056(c) to allow for the use of an alternative method of furnishing Forms 1095-B and 1095-C. Currently, Forms 1095-B and Forms 1095-C that only report enrollment in Part III (i.e., 1095-C forms that are coded 1G) do not have to be furnished annually. The new bill would codify and expand this flexibility to all Forms 1095-C to allow reporting entities to post a notice prominently on their websites notifying individuals that they may receive a copy of their form upon request rather than having to send written notices. The form must be furnished by January 31 of the year following the calendar year for which the return was required to be made or 30 days after the request.

What Does this Mean for Employers?

Although the bills still need to pass the Senate and be signed into law by the President before becoming effective, there appears to be bipartisan support for the changes, which suggests that they likely will be passed. While the changes are by no means monumental, they do provide some much-needed reforms to certain aspects of the ACA reporting requirements that employers have indicated are unduly burdensome, and they indicate that Congress is considering ways to ease the burdens of annual 1094 and 1095 reporting requirements.