Alert / Employee Benefits
IRS plays not-so-secret Santa, offers delay for supplying 1095-Cs to employees

The IRS has offered a bit of holiday good news/bad news to employers providing group medical benefits.

First the good news: The IRS has extended the deadline to provide to Affordable Care Act (ACA) full-time employees, and primary insureds under self-insured medical coverage, copies of Form 1095-C. That form reflects coverage offers made to the full-time employees, and self-insured coverage actually provided to primary insureds and their dependents. The delay pushes the deadline from Jan. 31 to March 2, 2020. The IRS cautioned that no extension to the March 2 deadline is available.

The delay also applies to insurers and others issuing Forms 1095-B to covered individuals.

Lockton comment: The delay is automatic and does not depend on the employer or insurer asking for an extension. The delay does not apply to the deadlines to file ACA reporting forms with the IRS. Those deadlines remain Feb. 28 for paper filing and March 31 for e-filing, although the employer or insurer may obtain an automatic 30-day extension to those filing deadlines by submitting Form 8809 to the IRS before the relevant due date.

Now the bad news, or mostly bad news. Recall that the ACA’s individual mandate penalty does not apply for 2019. The absence of a penalty renders largely irrelevant (at least for individual income tax purposes) any information about an individual’s months of actual coverage in the reporting year, information that in the past has been reported by most self-insured employers on Form 1095-C, Part III, and by insurers and small self-insured employers on Form 1095-B, Part IV.

Sadly, the IRS has not provided a blanket exemption from providing this coverage information. The IRS has, however, provided some relief.

Lockton comment: The IRS might still want coverage information because enrollment under most employment-based medical plans disqualifies the covered individual from eligibility for tax credits (subsidies) for the purchase of individual medical coverage in an online ACA marketplace. The IRS would naturally want to know if someone had received tax credits to which they were not entitled on account of their coverage under a group medical plan.

Insurers, and self-funded employers too small to be subject to the ACA’s employer mandate, are not required to automatically supply to primary insureds a Form 1095-B, provided the isurer or employer posts a prominent notice on its website indicating a Form 1095-B is available upon request, and reflecting a postal address, email address and phone number by which the form may be requested. Once requested, the insurer or small employer must supply the form within 30 days.

Lockton comment: Insurers and small employers must, however, file with the IRS all the 1095-Bs they prepare, even those not supplied to primary insureds under the relief described above.

Self-insured employers subject to the ACA employer mandate must, as a general rule, still complete Part III of Form 1095-C, showing months of actual coverage provided to primary insureds and their dependents. Failure to complete Part III could result in penalties. But these self-insured employers are not required to automatically supply a copy of the 1095-C to anyone who was not an ACA full-time employee for at least a month in 2019. To qualify for this relief, the self-insured employer must satisfy the same notice and furnish-on-request requirement described above.

Lockton comment: However, the self-insured employer must file with the IRS all the 1095-Cs it prepares, even those not supplied to primary insureds under the relief described above.

This relief could apply, for example, to 1095-Cs that in years past would have been automatically provided to the following primary insureds who had self-insured coverage for at least a day during the reporting year:

Employees who were never more than part-time employees during 2019

  • Full-time employees hired after Sept. 1, 2019 (they’re effectively not considered ACA full-time employees until Jan. 1, 2020, provided they’re offered coverage by then)
  • Variable-hour employees who did not enter their initial stability periods as ACA full-time employees before Jan. 1, 2020
  • Covered retirees who were never ACA full-time employees for at least a month in 20191
  • COBRA beneficiaries who were never ACA full-time employees for at least a month in 2019.1

Lockton comment: New Jersey and the District of Columbia both have ACA-like individual mandates in force now, and both jurisdictions will require insurers and employers to transmit to the state or district, as the case may be, copies of their 2019 ACA reporting forms in the first half of 2020. We’ll explore these unique state-imposed filing obligations (California and several other states will require the same in 2021, with respect to 2020 ACA reporting forms) on our webcast described in the Lockton comment below.

As additional good news, the IRS said it will continue to apply to 2019 filings the same "good faith" approach to employer ACA filings that applied to filings for the 2015 through 2018 calendar years. This relief applies only to incorrect and incomplete information reported on Form 1095-C or 1095-B and not to a failure to timely furnish or file the forms.

Lockton comment: Please join us for a more in-depth look at 2019 ACA reporting in our complimentary webcast scheduled for 2 p.m. CST, Dec. 12, 2019. Register here.

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1The IRS says the relief applies to “any employee [emphasis added] enrolled in…[a] self-insured health plan who is not a full-time employee for any month of 2019.…” Although the IRS refers to employees, we presume the relief applies to any primary insured who was not an ACA full-time employee of the employer for at least a month in 2019.

Not legal advice: Nothing in this Alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.

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