New ACA laws ease reporting burdens, penalty risk

Some recent changes in Affordable Care Act (ACA) reporting and penalty rules have brought welcome relief to employers.

Two new federal laws, signed by former President Joe Biden, ease certain ACA reporting burdens and enhance protections for employers.

Here are the four key changes that employers are likely to find beneficial:

1. Forms upon request: Employers can now distribute ACA Forms 1095-B and 1095-C only upon request, provided that they notify individuals of their right to request a copy. That reduces the logistical burden of distributing forms to all covered individuals. (Employers must still prepare and file these forms with the IRS.)
2. TIN reporting flexibility: For forms due in 2025 or later, employers can use an individual’s full name and date of birth if their Tax Identification Number (TIN) is unavailable.
3. Extended response time: Employers now have 90 days to respond to IRS Letter 226-J which provides employers notice of an “employer shared responsibility” (ESR) payment assessment. This extension from the previous 30 days allows more time for employers to review and address the issue.
4. Statute of limitations for penalties: The IRS must now adhere to a six-year statute of limitations for penalty assessments tied to coverage failures. That applies only to returns due after December 31, 2024. Previously, the IRS asserted there was no statute of limitations.

These changes aim to simplify processes, reduce administrative burdens, and provide clearer guidelines for compliance. Employers should consider updating their procedures to take advantage of these new provisions.