Last week the IRS published Notice 2020-76 announcing an extension of the impending January distribution due dates of IRS Forms 1095-B and 1095-C required under the Affordable Care Act (ACA). This relief is the same extension employers have received in previous years.
What is the impact of Notice 2020-76?
The distribution and reporting deadlines are as follows:
- March 2, 2021: Distribution deadline for Forms 1095-B and 1095-C
- March 1, 2021: IRS paper filings due
- March 31, 2021: IRS electronic filings due
It is important that as in years past, only the deadline for distribution to employees is extended; the deadlines to file these forms with the IRS is not extended.
This notice also indicates the IRS is again allowing employers to rely on “good faith efforts” to accurately complete the forms without fear of penalty for incorrect information reporting. The notice did indicate this is the final year employers will be allowed to rely on good faith reporting relief.
What is “Information Reporting” under the ACA?
As a refresher, all “Applicable Large Employers” (those with 50+ full time equivalent employees) must report on IRS Form 1095-C whether they offered affordable, minimum value health coverage to full-time employees and their dependents for at least one month during 2020. This includes employers who provide coverage through an insured group health policy.
In addition, any employer (regardless of size) sponsoring a self-funded medical plan must report on Form 1095-C all employees and their dependents who enroll under the plan (including part-time employees, directors, and COBRA participants).
Form 1095-C is distributed to employees similar to Form W-2 and is then filed with the IRS along with a transmittal form, 1094-C. Insurance companies are also obligated to distribute IRS Form 1095-B to all insured members and then file Forms 1094-B and 1095-C with the IRS.
This complex reporting structure serves two purposes:
- The 1095-B and 1095-C forms that employees and insured members receive provide documentation of compliance with the Individual Mandate.
- The IRS filing by employers provides documentation of compliance with the Employer Mandate in order to avoid ACA tax penalties.
What are recommended next steps?
Although the extension of these deadlines allows more time to gather data and revisit reporting systems and processes, employers should continue to prepare without delay.