IRS Eases Form 1095-C Burden for Employers

Affordable Care Act Requirements
Under the ACA, an employer that is an applicable large employer or “ALE” (i.e., generally, an employer with 50 or more full-time employees), or an employer that is not an ALE and sponsors a self-insured health plan, must file and furnish Forms 1095 to the IRS and any employee that was either a full-time employee for any month in the applicable year or that was covered under the employer’s group health plan (“applicable individual”). These Forms 1095 report each month that the applicable individual was made an offer of coverage or was covered under the health plan.

For the 2024 plan year, Forms 1095 must be furnished to employees by March 3. If an employer does not timely furnish Forms 1095 to each applicable individual, the IRS may assess a penalty for each applicable individual, which for 2025 is up to $330 per return or Form 1095, and up to $660 for intentional disregard.

Paperwork Burden Reduction Act
The Paperwork Burden Reduction Act (PBRA) provides employers with an alternative method to meet its obligations to provide applicable individuals with Forms 1095. Effective in 2025 (for the 2024 reporting year), employers are no longer required to provide each applicable individual with a Form 1095 on an annual basis. Instead, if the employer provides a “clear, conspicuous, and accessible” notice that the Form 1095 is available upon request, then the employer is only required to provide the requested notice by the later of (1) January 31 of the year following the Form 1095 reporting year, or (2) 30 days after receiving the request.

This new method of satisfying the ACA requirement to furnish Forms 1095 will significantly ease employers’ administrative burden, reduce the associated costs with furnishing notices to each applicable individual, and mitigate the likelihood that employers will be assessed a penalty for errors related to filings and distributions of Forms 1095.

Note, the PBRA only applies to furnishing the Forms 1095 to applicable individuals. Thus, employers are still required to prepare and file copies of the Forms 1095 with the IRS by February 28 (for paper filing) and March 31 (for electronic filing) of 2025.  Notably, any separate state reporting requirements and related penalties still apply.

Employer Reporting Improvement Act
The Employer Reporting Improvement Act (ERIA) further eases the ACA administrative burden by providing that an employer may rely on an employee’s prior year’s consent to receive Forms 1095 electronically. A consent to receive such notices electronically will remain effective, unless and until the employee revokes the consent in writing. The consent applies both if an employer elects to continue to provide the Form 1095 to each employee, or if the employee requests a copy of the Form 1095 after receiving a notice.

Implementation Considerations
While the PBRA and ERIA provides some relief for employers, there are a few remaining unknowns that may make implementation of the PBRA method complicated for employers deciding how to meet the Form 1095 obligations for the 2024 plan year.

First, the PBRA provides that the content requirements of the notice, other than being “clear, conspicuous, and accessible,” will be set forth at such time and in such manner as the Secretary of the Treasury may provide. To date, the Secretary has not provided specifics for the timing, content or delivery requirements of the notice, or provided a model notice.

Second, the deadline to provide the notice after a request is received (i.e., January 31 or 30 days), may occur before the regular filing deadline for furnishing or filing the Forms 1095 with the IRS. For example, if an employee requests a copy of the Form 1095 on January 15, the Form 1095 must be provided by February 15, which precedes the applicable IRS filing deadline. Employers should carefully consider when to distribute the notice to ensure that the Forms 1095 are complete and ready to be distributed such that they can meet the January 31 or 30-day deadline.

Third, the PBRA does not apply to state health insurance mandate requirements that may separately require an employer to furnish the Forms 1095 to employees. Depending on the individual state requirements, an employer may be required to continue to furnish the Forms 1095 to employees even though it is no longer required under federal law.

For sponsoring employers who wish to issue such a notice rather than distributing Forms 1095 for the 2024 plan year, we recommend that you consult with your legal counsel first before doing so.