Two recent developments make significant changes to Affordable Care Act (ACA) compliance, both effective immediately and offering important benefits for employers. 

Providing Forms 1095 to Employees

Since ACA was first implemented, employers have been required to report their offers of health care coverage to employees by filing Form 1095-B or 1095-C with the IRS and providing a copy of the form to employees.

Beginning with the 2024 tax year, which the reporting forms were set to be distributed in early 2025, employers are no longer required to automatically provide these forms to employees, provided two requirements are met. First, employers must notify employees that the employer will no longer automatically provide Form 1095, including a statement saying employees may request a copy and instructions on how to do so. Second, employers must provide a copy of Form 1095 to any employee who requests it, within 30 days of the request.

Note that employers must still file Form 1094 and Form 1095 with the IRS; this new rule simply relieves the responsibility to provide a copy to employees. Employers who wish to take advantage of the new rule should continue to coordinate with their service providers to ensure that Forms 1095 are prepared in time for filing to the IRS, and available to provide to employees upon request. This change may help employers save on the cost and administrative responsibility of sending the forms to each employee.

ACA Penalty Statute of Limitations 

Congress has also established a new six-year statute of limitations for employer penalty assessments under the ACA. While this may seem lengthy, especially considering the common three-year statute of limitations that applies to many tax assessments, the IRS had previously taken the position that there was no statute of limitations because Forms 1094 and 1095 were not tax returns.

This change is particularly important due to frequent delays between an employer’s alleged failure to comply with ACA requirements and the IRS’s notification of a proposed penalty assessment. This delay could be multiple years, meaning that if an employer had a systematic issue regarding its offers of coverage or reporting, penalties could be assessed for several years before the employer was notified that a change was necessary for compliance. Especially in corporate transactions, this change will help provide clarity and limit exposure for ACA compliance.