Employer Alert: Welcomed Changes to Affordable Care Act Information Reporting for 2025

Two new laws signed on December 23, 2024, are set to make Affordable Care Act (“ACA”) reporting easier and less time-consuming. The 'Paperwork Burden Reduction Act' and the 'Employer Reporting Improvement Act' introduce welcomed changes that streamline reporting requirements for filings due after December 31, 2024. Here's what you need to know about these significant updates:

Alternative Method for Furnishing Form 1095-C (and 1095-B) to Full-Time Employees and Covered Individuals

Under the “Paperwork Burden Reduction Act,” applicable large employers (“ALEs”) are no longer required to send Form 1095-C to full-time employees and covered individuals (if self-insured) unless such individual requests the form. To use this alternative method, the ALE must (1) provide clear, conspicuous, and accessible notice (at such time and in such manner as the IRS may provide) that the individuals may request a copy of such form; and (2) furnish the form upon request by the later of (a) January 31 of the year following the calendar year in which such coverage was provided or (b) 30 days after the date of the request. 

IRS regulations already provided an alternative method for furnishing Form 1095-B (used by providers, including sponsors of self-insured plans). The “Paperwork Burden Reduction Act” provides statutory authority for this alternative method and extends it to Form 1095-C.

Note! Many states have their own individual mandate and may impose reporting obligations on coverage providers and sponsors comparable to those under the ACA. Employers should monitor applicable laws in each state in which the employer operates.

Flexibility for Tax Identification Number (“TIN”) Reporting and Electronic Statements

The “Employer Reporting Improvement Act” provides statutory authority for IRS regulations which allow (1) use of the individual’s full name and date of birth as a substitute for the TIN if the TIN is unavailable; and (2) electronic distribution of Form 1095-C (and 1095-B, for providers and sponsors of self-insured plans) to individuals if the individual has given consent.

Longer Letter 226J Response Time

The “Employer Reporting Improvement Act” extends the deadline from 30 to 90 days for ALEs to respond to a letter from the IRS informing the employer of a proposed assessment of the employer shared responsibility payment before the IRS takes further action. Before, employers were often scrambling to collect relevant data from payroll companies and/or providers to respond in a timely manner.

Statute of Limitations for IRS Assessment of ESRP

The “Employer Reporting Improvement Act” establishes a 6-year statute of limitations for the IRS to assess the employer shared responsibility payment. The period begins on the due date for the return (or the date the return was filed, if later).

Previously, the IRS said there was no statute of limitations.

If you have any questions related to this Client Alert, please do not hesitate to contact any Employee Benefits & Executive Compensation group member or your regular Smith Anderson lawyer.

Special thanks to contributing author Kathy Lockhart, Smith Anderson senior paralegal.