IRS Provides Limited 2020 Health Coverage Information Reporting Deadline and Enforcement Relief

IRS Provides Limited 2020 Health Coverage Information Reporting Deadline and Enforcement Relief

On October 2, the Internal Revenue Service (IRS) Notice 2020-76, which gives applicable large employers (ALEs) and health insurance issuers (including self-funded-health plans) one extra month to furnish Forms 1095 B & C to employees and covered individuals. Instead of being due on January 31, 2021, the statements now must go out by March 2, 2021.  The notice also gives some Affordable Care Act (ACA) health coverage reporting penalty relief.  Given that the individual penalty for not maintaining health insurance coverage is now zero dollars, the IRS will not prioritize enforcing Form 1095-B distribution under certain conditions. Further, the agency will give all entities reporting penalty relief if they make a mistake when completing their 2020 Forms 1094 and 1095 B and C.  This penalty relief is contingent on a demonstrable good-faith effort towards compliance.

One ACA reporting responsibility that did not change is the requirement that all ALEs and health insurance submit coverage documentation to the federal government.  Paper copies of Forms 1094 and 1095 B and C are due to the IRS by February 28, 2021.  Entities must complete electronic submissions by March 31, 2021.  While companies of any size that issue Forms 1095 may submit them electronically, those that issue 250 or more Forms 1095 B or C must use the electronic submission process.  Employers should also let employees know that they do not need Forms 1095-B and 1095-C to file their individual income tax returns but should keep any 2020 forms with their tax records.

The compliance enforcement relief in Notice 2020-76 comes with some fundamental limitations. The IRS clarifies that while they will not focus on enforcing the requirement that people get a paper Form 1095-B for 2020 since individuals do not need it for tax purposes this year, any entity that chooses not to distribute these forms must meet other standards. They need to prominently post a Form 1095-B availability notice on their website with contact information and still give a paper statement to any covered person who requests a copy within 30 days. The enforcement limitation also does not apply to the requirement that ALEs distribute Forms 1095-C.  ALEs that offer self-funded coverage to eligible employees also need to complete part three of the form, addressing 2020 coverage status.

In terms of the compliance penalty transition relief for the content of Forms 1094 and 1095 C, it only applies to employers and health plans that accidentally furnish and file incorrect or incomplete information on a statement or return.  If a business ignores their reporting obligations, then penalties will apply. Employers and issuers who miss the statement distribution deadline or are late to file their returns with the IRS may have penalty liability as well. To determine good faith, the IRS will also consider whether an employer or other coverage provider made reasonable efforts to comply and if the entity is taking steps to ensure complete adherence to the reporting requirements in the years ahead.

Finally, the IRS’s deadline changes do not impact state-specific health coverage reporting requirements that affect many employers and health insurance carriers. California, the District of Columbia, Massachusetts, New Jersey, and Rhode Island all have 2020 health coverage information reporting requirements for health insurance issuers and employers. Those states all control the related deadlines.  None of those jurisdictions have changed their existing deadlines or reporting compliance procedures for 2020 at this time.