Relief for Furnishing 2020 Forms 1095-B and 1095-C to Individuals
The Internal Revenue Service (IRS) released Notice 2020-76, which extends the Affordable Care Act (ACA) reporting deadline until March 2, 2021, for providing statements to employees. The deadline extension is nearly identical to the extension provided for the 2019 statements. It also provides relief from certain penalties relating to health coverage reporting. However, it indicates this is the last year (subject to the comments due by February 1, 2021) there will be no penalties for providing inaccurate information as long as a good faith effort is made.
The ACA added Sections 6055 and 6056 to the Internal Revenue Code (Code), which require health coverage providers (i.e., insurers and self-insured plans) and "applicable large employers”1 to report to employees and to the IRS if health coverage was offered and if the employee had coverage. The IRS issued final regulations in 2014 that set forth deadlines for filing that information and issued Forms 1094-B, 1094-C, 1095-B, and 1095-C to report this required information. The 1094 Forms are provided to the IRS only, while the 1095 Forms (employee statements) are provided to both employees and the IRS.
Large employers/plans or their administrator (large employers must send regardless if insured or self-funded)
Insurers and self-insured small employers/plans
Non-compliance with the applicable due dates or providing incomplete or inaccurate information will result in penalties under Code sections 6721 or 6722 for each failure to timely furnish or file completely and accurately, i.e., up to $280 per participant capped annually at $3,392,000 per employer, insurer, or plan. As explained in the next-to-last bullet below, no penalty applies if a good faith effort can be demonstrated. See sections 3.57 and 3.58 of Rev. Proc. 2019-44 for more information about penalty amounts.
Summary of Notice 2020-76
- No Extension for Filings with the IRS: Notice 2020-76 does not extend the due dates for filing Forms 1094-B, 1095-B, 1094-C, and/or 1095-C with the IRS. Therefore, the due dates for filing transmittal forms with the IRS remain as February 28, 2021, if filing by mail, or March 31, 2021, if filing electronically. However, up to two automatic 30-day extensions are available under the normal rules by submitting a Form 8809.
- 30-Day Extension for Employee Statements: The Notice extends the deadline for employers and insurers to issue statements to employees on Form 1095-B or Form 1095-C from January 31, 2021 to March 2, 2021. An additional 30-day extension will not be available. However, please note the relief for 1095-B below.
CHEIRON OBSERVATION: The deadline to provide a statement to individuals has been extended for every reporting year since the issuance of final regulations in 2014.
- Relief for Providing 1095-B Statements to Individuals (and, in limited circumstances, 1095-C Statements): The Tax Cuts and Jobs Act enacted December 22, 2017, reduced the penalty on individuals for failure to have health insurance coverage to zero, so an individual does not need the information on Form 1095-B in order to file an income tax return with the IRS. Therefore, the IRS will not penalize insurers, employers, or plans for failing to furnish a Form 1095-B to individuals for any month of 2020, provided that the following two conditions are satisfied:
- The reporting entity posts a notice prominently on its website stating that responsible individuals may receive a copy of their 2020 Form 1095-B upon request, accompanied by an email address and a physical address to which a request may be sent, as well as a telephone number that responsible individuals can use to contact the reporting entity with any questions, and
- The reporting entity furnishes a 2020 Form 1095-B to any responsible individual upon request within 30 days of the date the request is received.
The above relief, with the same two conditions, also applies with respect to a self-insured plan regarding a Form 1095-C to any employee who is not a full-time employee. This relief, however, does not extend to the requirement to furnish Forms 1095-C to full-time employees.
CHEIRON OBSERVATION: The Notice does not specify by which date the notice has to be posted, but it seems advisable to make sure the notice is posted by the 1095-B due date of March 2, 2021.
- Final Extension of Good-Faith Relief for Reporting and Furnishing under Sections 6055 and 6056: The Notice continues to remove penalties on entities that report incorrect or incomplete information on the 1094 and 1095 forms when these entities can show that they made good-faith efforts to comply with the information-reporting requirements of the regulations (both for furnishing to individuals and for filing with the IRS). The removal of penalties applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the 1094 and 1095 forms. Reporting entities that fail to file an information return or furnish a statement by the extended due dates, except as otherwise provided in this notice, are not eligible for good-faith
CHEIRON OBSERVATION: As this good-faith relief always was intended to be transitional, the Notice states that this is the last year this relief will be provided.
- Request for Comments: Treasury and the IRS request comments from taxpayers and reporting entities as to whether an extension of the due date for furnishing statements to individuals, and an extension of good-faith reporting relief, continues to be necessary for future years and, if so, Comments must be submitted by February 1, 2021, and can be submitted electronically via the Federal eRulemaking Portal at www.regulations.gov (type “IRS2020-0037" in the search field) or via mail to: Internal Revenue Service, Attn: CC:PA:LPD:PR (Notice 2020-76), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.
Action Needed Now
Employers, administrators, and insurers should continue to gather the required data, prepare returns, and run tests on their systems for the electronic transfer of information to the IRS in order to meet the deadlines. If the 30-day extension for releasing employee statements, i.e., 1095-B or 1095-C statements, would be helpful in the future or if the good-faith reporting removing penalties for inaccurate or incomplete reporting would be helpful in the future, then employers, administrators, and/or insurers should consider submitting a comment.
Cheiron consultants can assist you with your ACA reporting obligations.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.
1 Generally, "applicable large employers" are employers with 50 or more full-time employees (including full- time equivalent employees).