Applicable large employers (“ALEs”) are subject to reporting requirements under the Affordable Care Act (the “ACA”). To comply with the reporting requirements, an ALE must file a Form 1095-C with the IRS reporting certain information about the ALE’s offer of coverage to each full-time employee, identifying the employee, spouse, and dependents who are covered under the employer’s self-insured group health plan, and provide a copy of the Form 1095-C to each full-time employee.
The reporting requirements provide information to the IRS that it uses to determine whether the ALE has complied with the offer of coverage rules under Section 4980H of the Internal Revenue Code of 1986, as amended (the “Code”). If an ALE fails to offer affordable, minimum-value coverage to at least 95% of its full-time employees, it can be subject to a penalty under Code Section 4980H(a). If the ALE fails to offer affordable coverage to one or more full-time employees, the ALE can be subject to a penalty under Code Section 4980H(b).
On December 23, 2024, President Biden signed two bills into law that codify some existing rules and provide additional relief to ALEs who are subject to the reporting rules.
Alternative Method of Furnishing Form 1095-C to Full-Time Employees
The Paperwork Burden Reduction Act (Pub. L. 118-167) provides an alternative method of furnishing copies of Form 1095-C to full-time employees. Rather than mailing the Form 1095-C to the employee’s last known address or furnishing the Form via electronic means, an ALE may post a notice of availability on its website and provide a hard copy to an employee upon request.
IRS Notice 2025-15, published in February 2025, states that an ALE may comply with the alternative method of furnishing copies by following the requirements of Treas. Reg. Section 1.6055-1(g)(4)(ii)(B)(1)-(3). To comply with the guidance, an ALE should take the following steps:
- Post a clear and conspicuous notice on its website stating that employees may receive a copy of their notice upon request.
- The notice must include the employer’s e-mail address, mailing address, and telephone number that employees can call with any questions.
- The notice must be posted on the website no later than the required distribution date (for 2025 Forms 1095-C, this would be March 3, 2026), and the notice must be retained on the website through October 15 of that year.
- If the employee requests a copy of his/her Form 1095-C, the employer must provide the Form to the employee either in a hard copy or via electronic delivery (if the employee has consented to electronic delivery) by the later of (i) January 31 of the year following the calendar year for which the Form 1095-C was filed, or (ii) 30 days of the date of the request.
As employees no longer need to provide evidence of health plan coverage to avoid an individual penalty under the ACA, we expect that many ALEs will take advantage of the new posting alternative for furnishing Forms 1095-C to employees.
An ALE may utilize the posting alternative for calendar years after 2023.
The Employer Reporting Improvement Act (Pub. L. 118-168; the “ERI Act”) made the following additional change to reporting provisions under the ACA.
Electronic Delivery of Form 1095-C
Under existing regulations, an ALE may deliver copies of Form 1095-C via electronic means if the employee has consented to electronic delivery. See, Treas. Reg. Section 301.6056-2. Under the ERI Act, an employee is deemed to have consented to electronic delivery if the employee has previously consented at any prior time and has not revoked his/her consent. The new law is intended to codify the existing regulations in general.
This provision is effective for Forms 1095-C, due after December 31, 2024.
TIN Reporting
If an ALE is unable to obtain the tax identification number (“TIN”) of a spouse or dependent, the ALE may report the full name and date of birth of the spouse or dependent on Form 1095-C in lieu of the TIN. This provision is intended to codify existing regulations. We presume that ALEs will need to follow the existing rules and solicit TINs of the spouses and dependents prior to substituting the name and date of birth on Form 1095-C; further guidance on this point would be helpful.
This provision is effective for returns with a due date after December 31, 2024.
90 Days to Respond to Letter 226J
Under current IRS procedures, an ALE only has 30 days to respond to an IRS notice of proposed penalty assessment under Code Section 4980H. The proposed penalty assessment is set forth in Letter 226J.
Under the ERI Act, ALEs will have at least 90 days to respond to Letter 226J. This is a welcome extension as ALEs may not have all data readily available to respond to the proposed penalty assessment, and 30 days may not allow sufficient time to collect the necessary data and complete a response.
This provision is effective for assessments proposed in taxable years beginning in 2025.
Statute of Limitations on Penalty Assessments
Prior to the ERI Act, the IRS had taken the position that no statute of limitations applied to penalties under Code Section 4980H. Therefore, the IRS could, in theory, impose penalties under Code Section 4980H as far back as 2015, when the reporting and penalty provisions first became effective.
The ERI Act adds a 6-year statute of limitations to penalty assessments under Code Section 4980H, effective for returns due after December 31, 2024. Although this is longer than the 3-year statute of limitations that applies to many tax returns, it is certainly preferable to having no statute of limitations at all.
Conclusion
Although the two new laws provide only incremental relief from the burdensome reporting requirements to which ALEs are subject, the 90-day period for responding to Letter 226J and the 6-year statute of limitations provides a few new tools to limit potential exposure to the 4980H penalties.
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