Employers should be aware of changes to 2021 Affordable Care Act (ACA) reporting as they begin to prepare to comply with the distribution and reporting requirements. As a reminder, Applicable Large Employers or “ALEs” in 2021 (those with 50+ full-time and full-time equivalent employees in 2020) and all employers who sponsored a self-insured or level funded plan in 2021 (no matter their size) must distribute IRS 1095 forms by January 31, 2022 and submit reporting by February 28, 2022 (if filing by paper) or March 31, 2022 (if filing electronically).
No Deadline Extensions Expected
For every year since reporting has been required, the IRS has extended the January 31st deadline to distribute 1095 forms to early March. No such deadline extension has been announced for 2021 ACA reporting, and no such extension is expected. As such, employers should prepare to distribute 1095 forms to employees by January 31, 2022.
No Good Faith Relief for 2021 ACA Reporting
For the last several years of ACA reporting, the IRS provided “good faith relief” from penalties to employers who reported incorrect or incomplete information on their ACA reporting but showed that they made good faith efforts to comply. This relief applied to errors related to missing or inaccurate taxpayer identification numbers, dates of birth, as well as other information required on returns. In Notice 2020-76, the IRS indicated that 2020 reporting was the last time they intended to extend this good faith relief. As such, employers should ensure they relay correct/complete data to their ACA reporting vendor and review reporting for accuracy before reporting is submitted, as no good faith relief will shelter them from potential penalties from errors.
No Electronic Distribution of 1095-B Forms Expected
For 2019 and 2020 ACA reporting, the IRS provided penalty relief for small level funded/self-insured employers who failed to distribute 1095-B forms if they posted a notice on their website about the availability of forms and provided the forms within 30 days of any request. This relief was removed from the 2021 1095-B draft instructions (the instructions are expected to be finalized by mid to late November). As such, small level funded/self-insured employers must distribute 1095-B forms to the “responsible individual” (i.e., the primary subscriber) on paper by mail (or hand delivered), unless the recipient affirmatively consents to receiving the 1095-B form in an electronic format.
Potential ACA Penalties
Employers may be subject to substantial penalties for failing to report, failing to report accurately and on time, and/or failing to fulfill the distribution requirement. The potential employer penalties are outlined below:
|Late/Incorrect Forms Furnished to Employees & Late/Incorrect Forms Furnished to the IRS||• $280 per return (for non-willful failures, capped at $3,392,000)|
• $50 per return (if corrected within 30 days of deadline, capped at $565,000)
• $110 per return (if corrected by August 1, capped at $1,696,000)
• $560 per return (if due to intentional disregard)
As such, it is important more than ever for employers to carefully review their ACA reporting forms and to work with a competent ACA reporting vendor with a solid data collection and review process.
- Determine whether you are required to complete ACA reporting;
- Set up an ACA reporting vendor to assist with the distribution and reporting requirements; and
- Carefully review your data and reporting forms and correct any errors before filing.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved