Preparing Forms 1094 and 1095 for 2021 ACA Reporting

From fostering a workplace culture centered on supporting the physical, emotional, career and financial wellbeing of employees to ensuring that benefit programs are compliant with local, state and federal requirements, effectively protecting the wellbeing of your employees connects directly to protecting the wellbeing of your organization overall. Compliance Connections delivers monthly, actionable guidance designed to help you manage and optimize the connections between the compliance of your benefits and human resources programs to overall organizational wellbeing. This edition focuses on Forms 1094 and 1095 reporting under the Patient Protection and Affordable Care Act (ACA). Below, we explore some important action steps employers should keep in mind when preparing for 2022 reporting.

Say goodbye to good faith relief. For ACA reporting years 2015, 2016, 2017, 2018, 2019, and 2020, the IRS provided penalty relief when reporting entities reported incorrect or incomplete information on a return or statement if those entities could show they made good faith efforts to comply with the information-reporting requirements under sections 6055 and 6056 for the applicable year (both for furnishing to individuals and for filing with the IRS). This relief applied to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on a return or statement. However, in Notice 2020-76, the IRS announced that it would no longer provide relief for good faith efforts. Thus, employers need to make sure that their data collection efforts and actual reporting contain the correct information for taxpayer identification numbers, dates of birth, and other information contained on Forms 1095. How will your organization make sure that your ACA reporting for 2021 goes beyond good faith efforts?

Say farewell to automatic extensions, too. In addition to transitional relief for good faith efforts to comply, many past years saw automatic extensions to furnish statements to individuals and, in some years, extensions to filing deadlines. But such transitional relief will not be available for the 2021 reporting year. So, employers must prepare to comply with the January 31, 2022 due date for furnishing statements to individuals unless they go through the steps to apply for a discretionary 30-day extension. What additional steps does your organization need to take to ensure that it meets the applicable deadlines for furnishing and reporting Forms 1095?

Bid adieu to relief for furnishing Forms 1095 to certain individuals. For reporting years 2019 and 2020, the IRS granted relief from penalties for failure to furnish Forms 1095-B to individuals if certain conditions were met. Specifically, the IRS indicated that it would not assess a penalty under section 6722 against a reporting entity for failing to furnish Forms 1095-B to responsible individuals in cases where the following two conditions are met. First, the reporting entity was required to post a notice prominently on its website stating that responsible individuals could receive a copy of their Forms 1095-B upon request, accompanied by an email address and a physical address to which a request could be sent, as well as a telephone number that responsible individuals could use to contact the reporting entity with any questions. Second, the reporting entity was required to furnish a Form 1095-B to any responsible individual upon request within 30 days of the date the request was received. That relief has been removed from the 2021 draft Form 1095-B Instructions. If your organization relied upon the relief from furnishing Forms 1095 to certain individuals, what will be on your to-do list to restart automatic distribution to those individuals?

Pay attention to the electronic filing threshold. On July 1, 2019, President Trump signed the Taxpayer First Act (the Act) into law. The Act lowers the threshold for electronic filing of information returns beginning in 2021 from 250 to 100 Forms. The Act further decreases the threshold to 10 Forms for calendar years after 2021. This change is slated to impact Forms 1095 reporting too, and employers should note that proposed regulations require aggregating counts when determining if the threshold is met. This means, for example, that an employer filing 50 Forms W-2 and 50 Forms 1095 would meet the 100 Forms threshold. However, the draft Form 1094-C and 1095-C Instructions do not include the 100 Forms threshold, but instead retain the 250 Forms threshold. Furthermore, the IRS has indicated that it may not be able to finalize applicable regulations by the March 31, 2022 electronic filing deadline for Forms 1095. Although it is thus unlikely that the new, lower threshold will apply for 2021 reporting in 2022, employers should note that the threshold may change when final Instructions are released for 2021. Regardless, smaller employers should be prepared to explore the impact of the lower electronic filing threshold on their reporting obligations for 2022. In what ways would a lower IRS Form electronic filing requirement impact your organization?

Remember that there's no statute of limitations applicable to Employer Shared Responsibility Payments (ESRP) imposed by section 4980H. In a late 2019 memorandum released by the IRS Office of the Chief Counsel, the IRS stated that there is no applicable statute of limitations on the potential assessment of ESRP imposed by section 4980H because there is no tax return filed to report an employer's liability. This position means that, even though the IRS has been assessing penalties in batches based upon filing years, the IRS can still return to previous years to assess penalties. This may alter potential recordkeeping practices and cause employers to retain ACA reporting supporting data longer than anticipated. How will the IRS' perspective that ESRP assessments are not subject to a statute of limitations impact your organization's recordkeeping and other practices?

This is a preview edition of Compliance Connections, a monthly publication produced by Gallagher's Compliance Consulting Practice. For five more action steps, contact your Gallagher representative or visit our Compliance Resources page to subscribe and receive the full version of this publication each month.


Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Compliance Connections series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Plan sponsors should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance requirements listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support plan sponsors in their compliance efforts, please contact your Gallagher representative.


The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization's specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization's general counsel or an attorney who specializes in this practice area.