IRS Releases Proposed Regulations on Sections 6055 and 6056 Reporting
On November 22, the IRS released proposed regulations that would provide permanent relief to applicable large employers (ALEs) and other reporting entities in the form of an automatic extension of 30 days to furnish statements to individuals and an alternate furnishing method for Forms 1095 for non-employees and non-full-time employees covered under self-insured health plans while the individual shared responsibility penalty remains at $0.
Background
Section 6055 of the Internal Revenue Code (Code) provides that all persons (or entities) that provide minimum essential coverage under the Patient Protection and Affordable Care Act (ACA) must report certain information to the IRS that identifies covered individuals and the period of coverage. Those persons or entities also must furnish a statement to the covered individuals containing the same information. Current rules require a reporting entity to file with the IRS an information return and a transmittal on or before February 28 (March 31 if filed electronically) of the year following the calendar year to which it relates and to furnish to the responsible individual identified on the return a written statement on or before January 31 of the year following the calendar year to which the statement relates. The IRS generally has designated Form 1094-B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage, to meet the section 6055 requirements.
Section 6056 of the Code requires an ALE that is required to meet the requirements of section 4908H to file annual information returns and furnish written statements in relation to the health insurance, if any, that the employer offered to its full-time employees during the previous calendar year. Every ALE or member of an aggregated group that is determined to be an ALE (ALE member) is required to file with the IRS an information return and a transmittal on or before February 28 (March 31 if filed electronically) of the year following the calendar year to which it relates and to furnish to full-time employees a written statement on or before January 31 of the year following the calendar year to which the statement relates.
The IRS generally has designated Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to meet the section 6056 requirements. In addition, an ALE member that offers coverage through a self-insured health plan must complete the reporting required under section 6055, specifically the information regarding each individual enrolled in the self-insured health plan, using Form 1095-C, Part III, rather than Form 1095-B. ALE members use Form 1095-C, Part III, to meet the section 6055 reporting requirement for all employees.
The current regulations under sections 6055 and 6056 allow the IRS to grant an extension of time of up to 30 days to furnish Forms 1095-B and 1095-C to an ALE or other filing entity that shows good cause for the delay. Additionally, filers of Forms 1095-B, 1094-C and 1095-C may receive an automatic 30-day extension of time to file the forms with the IRS by submitting Form 8809, Application for Extension of Time to File Information Returns, on or before the due date for filing the forms.
Deadline to furnish statements to individuals extended for 30 days after January 31
The proposed rules would permanently extend the deadline for employers to furnish statements to individuals under both Internal Revenue Code sections 6055 and 6056. Specifically, the deadline would be extended to no later than 30 days after January 31 of the calendar year following the year (or on the next business day if that day were to fall on a weekend or legal holiday). In practical terms, this rule would generally extend the relevant furnishing deadline to March 2 (March 1 in a leap year). The proposed automatic 30-day extension would replace both the 30-day extension previously available to reporting entities for good cause and the authorization for the IRS to provide automatic extensions in any given year. This new automatic extension is intended to apply for calendar years beginning after December 31, 2021, but the IRS indicated that employers may choose to use the extended deadline to furnish statements for calendar years beginning after December 31, 2020, which means that employers may rely upon the extended deadline for statements to be furnished to individuals in 2022 for coverage provided in 2021.
Alternate manner available for furnishing statements under Section 6055
Additionally, the proposed rules would permit insurers, ALEs, and other reporting entities to use an alternative method to furnish information about employees' coverage during the past year under Code Section 6055, which is designed to provide individuals with information to substantiate their compliance with the ACA individual shared responsibility provisions. Under this alternative method, a reporting entity would be required to post a notice on the entity's website stating that individuals may receive a copy of their statement upon request. The notice must include certain information and this alternative method of furnishing would apply only while the ACA individual shared responsibility payment penalty is zero.
More specifically, under the proposed rules, a reporting entity will be required to include a clear and conspicuous notice on the reporting entity's website that is reasonably accessible by individuals who may search the entity's website for tax information. A notice posted on a reporting entity's website will satisfy the requirement under proposed regulations if written in plain, non-technical terms and with letters of a font size large enough (including any visual clues or graphical figures) to call to a viewer's attention that the information pertains to tax statements reporting that individuals had health coverage. For example, a reporting entity's website that includes a statement on the main page, or a link on the main page, reading "Tax Information," to a secondary page that includes a statement, in capital letters, "IMPORTANT HEALTH COVERAGE TAX DOCUMENTS;" explains how responsible individuals may request a copy of Form 1095-B, Health Coverage, or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, as applicable; and includes the reporting entity's email address, mailing address, and telephone number, would be a "clear and conspicuous notice" under these proposed regulations. If requested, the applicable Form must be provided within 30 days of the date the request is received.
The notice must remain on the reporting entity's website until October 15 (or first business day following October 15 if October 15 falls on a weekend or holiday) of the year following the calendar year to which the applicable Form applies. For example, if a plan sponsor uses the alternate reporting for Forms 1095-B issued in 2022 for coverage provided in 2021, the plan sponsor must keep the notice on its website until October 15, 2022.
Because self-insured ALEs will typically use Forms 1095-C to furnish participants with the required information under both Code sections 6055 and 6056, an ALE that sponsors a self-insured plan will typically be able to use this alternative method of furnishing information only for individuals for whom they would otherwise be permitted to furnish a Form 1095-B, such as full-year COBRA participants and other non-employees. ALEs that sponsor insured health plans are not required to report under Code section 6055, so the alternative method of furnishing this information will be available only to those plans' insurers. Both fully-insured and self-insured employers will still be required to furnish Forms 1095-C to their current employees and dependents to report offers of coverage under ACA ESR rules. This alternate method of furnishing is intended to apply for calendar years beginning on or after December 31, 2021, but reporting entities, such as plan sponsors, may choose to rely upon it for calendar years beginning after December 31, 2020.
Key Takeaways
- The deadline to furnish Forms 1095 to individuals will be permanently extended to March 2 (March 1 in leap years).
- The deadline to file Forms 1094 and 1095 with the IRS remains unchanged (February 28 (March 31 if filed electronically)).
- Even though the regulations are proposed and would not otherwise be effective for this year's disclosures, employers may rely upon the furnishing deadline relief for Forms 1095 due for distribution in 2022 (for coverage provided in 2021).
- As long as the individual mandate penalty remains at $0, reporting entities, such as plan sponsors, may post notices permitting individuals who are not full-time employees or who are non-employees enrolled in an ALE's self-insured health plan, to receive their Forms 1095 only available upon request if specific notice requirements are met.
- Even though the regulations are proposed and would not otherwise be effective for this year's disclosures, employers may rely upon the alternate disclosure relief for Forms 1095 due for distribution in 2022 (for coverage provided in 2021).