Congress recently passed the Employer Reporting Improvement Act and the Paperwork Burden Reduction Act (the Acts), which are now awaiting President Biden’s signature. The Acts, among other things, introduce several significant changes to the reporting and enforcement rules of the Affordable Care Act (ACA). 

The Current Rules

Forms 1095-B and 1095-C: Under the ACA, plan sponsors, specifically Applicable Large Employers (ALEs), must report information about the health coverage they offer to their employees. This ACA reporting is done through Forms 1095-B and 1095-C, which must be filed with the IRS and provided to all full-time employees and employees receiving employer-sponsored coverage. (This is the case, even though the ACA’s individual mandate is currently set to $0, and therefore functionally isn’t being enforced.)

Key aspects of ACA enforcement also include:

• A Tight Turnaround to Respond to Proposed Assessments: The IRS may assess employer shared responsibility payments (ESRP) based on a plan sponsor’s reporting. Before making this assessment, the IRS will send a letter with a proposed ESRP, to which sponsors can respond with corrected coding and other mitigating information. Plan sponsors currently have only 30 days to respond to these letters. This can be particularly challenging, as the letters are sent via US mail and often take time to get to the right person. A late response can result in an ESRP assessment when one isn’t warranted, and additional penalties.
• No Statute of Limitations: The period for assessing and collecting ESRPs has generally been open-ended, with no statute of limitations to potentially limit liability for aged amounts.

Changes Introduced by the Acts

The Acts introduce several changes which will improve the reporting and enforcement process for sponsors:

• Forms 1095-B and 1095-C: Plan sponsors (and health insurance providers for fully insured plans) are no longer required to send these Forms to all full-time employees and covered individuals. Instead, these Forms must only be sent in response to an employee/covered individual’s request. If requested, the applicable Form must be provided by the later of January 31 or 30 days after the date of the request. One big caveat – in order to take advantage of this change, sponsors must provide notice to employees, telling them about their right to ask for a Form. Further guidance on the form and requirements for this notice may be forthcoming. Meanwhile, a good faith interpretation will likely suffice when drafting the notices.
• Extended Response Time for Proposed ESRPs: Plan sponsors will now have at least 90 days to respond to a proposed ESRP before further action is taken. This extension provides plan sponsors more time to open their mail! (With more time to gather necessary information and respond appropriately, which may result in fewer ESRP assessments and other penalties.)
• Statute of Limitations on Penalty Assessment: There will now be a six-year period for collecting ESRPs, counting from the due date for filing the applicable Forms 1095-B and 1095-C or the actual filing date, whichever is later. This extension provides clarity and predictability for plan sponsors, capping potential assessments and allowing sponsors to better manage their compliance efforts.