Applicable large employers (“ALEs”) have a new option to skip furnishing Form 1095-C to full-time employees and employees enrolled in an employer-sponsored self-insured plan (“eligible employees”) if certain conditions are met. While this new option lessens an ALE’s burden to distribute Form 1095-C paperwork to eligible employees, ALEs should understand the conditions required to use this option before relying on it.
Under prior and current law, ALEs (employers with 50 or more full-time and full-time equivalent employees under the Affordable Care Act’s calculation) are required to furnish written statements describing the health insurance, if any, that the ALE offers to eligible employees. An ALE can meet this requirement by distributing a completed Form 1095-C to each eligible employee that the ALE files with the IRS. The IRS uses the information to administer the Affordable Care Act’s Employer Shared Responsibility Provisions. Beginning in 2023, the IRS permanently extended the deadline for ALEs to furnish Form 1095-C to eligible employees to 30 days after January 31. (87 Fed. Reg. 76569, December 15, 2022.) This year, the deadline to furnish the Form 1095-Cs covering tax year 2024 is March 3, 2025. ALEs who fail to furnish statements to eligible employees by the deadline are subject to penalties.
On December 23, 2024, President Biden signed the Paperwork Burden Reduction Act (HR 3797) into law. This law adds an option where ALEs do not have to automatically provide Form 1095-C to eligible employees and instead, ALEs will be treated as timely furnishing the required Form 1095-C if they provide a notice to eligible employees that employees can request a copy of their Form 1095-C. Then, if an employee requests a copy of their Form 1095-C, the ALE must provide it no later than: (i) January 31 of the year following the calendar year for which the return was required to be made (e.g., by January 31, 2025 for Form 1095-Cs covering tax year 2024); or (ii) 30 days after the request date.
While this new option greatly eases an ALE’s burden of printing and distributing Form 1095-Cs to all eligible employees, there are a few unknowns that have yet to be answered about this option and some strategic considerations for ALEs.
First, it is not clear what notice would suffice to allow an ALE to skip furnishing Form 1095-C. The language in the Paperwork Burden Reduction Act states that the notice must be “clear, conspicuous, and accessible (at such time and in such manner as the Secretary may provide)….” The Treasury Secretary has yet to issue information about the “time” and “manner” required for such notice. It is not clear when employers must provide the notice, how often the notice must be provided, and whether the notice needs to be provided as a hard copy, electronically, or both.
With President-elect Trump taking office later this month and the nomination process for a new Treasury Secretary, it seems unlikely that details about the time and manner of the notice will be issued before the March 3, 2025 deadline to furnish the form. Any ALE that prepares and distributes its own notice runs the risk that the notice may not meet requirements the Treasury Secretary may later impose. The IRS may determine that an insufficient notice means that ALE does not meet the requirements that would allow it to skip furnishing Form 1095-C and therefore, may not treat that ALE as having timely furnished the required Form 1095-C. ALEs that fail to timely meet the furnishing requirements may still be subject to potential penalties.
Second, even with a sufficient notice that meets the Treasury Secretary’s (future) requirements, if an employee requests their Form 1095-C, an ALE will need to be able to provide the form by January 31 or within 30 days of the request, which may be a more constricted timeline than the regular method of furnishing the forms. For employees who make their request on or before January 1, they are entitled to a copy of their Form 1095-C by January 31. For employees who make their request after January 1, they are entitled to it within 30 days of their request. ALEs who use the new option to skip furnishing Form 1095-C must be ready and able to meet these deadlines, even though ALEs who do not use the option have an extended timeframe for furnishing Form 1095-Cs up to early March (e.g., March 3, 2025 for this year).
Third, ALEs who use the option to skip furnishing Form 1095-C are still required to prepare and e-file a Form 1095-C for every eligible employee by the March 31 deadline. The Paperwork Burden Reduction Act does not change the filing requirement. ALEs who use the option to skip furnishing must remain diligent by still completing the Form 1095-Cs and e-filing them on time. ALEs who fail to file statements by the deadline are subject to penalties, unless the failure is due to a reasonable cause.
Any ALE interested in utilizing the option to skip furnishing should consider the points above. Until the Treasury Secretary or IRS issues a model notice or otherwise issues information specifying the notice requirements, the safest course of action may be for ALEs to still furnish Form 1095-C to all eligible employees by March 3, 2025 for tax year 2024. The ALE may then wait and see if the IRS or Treasury Secretary releases more information by this time next year for Form 1095-Cs covering tax year 2025. ALEs could also seek more information from their payroll providers by asking whether the payroll provider is reviewing the new option to skip furnishing Form 1095-C and whether it is preparing sample notices.
Liebert Cassidy Whitmore attorneys are closely monitoring developments in relation to this Special Bulletin and are able to advise on the impact this could have on your organization. If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.