On December 23, 2024, President Biden signed the Employer Reporting Improvement Act (H.R. 3801) into law. Applicable Large Employers should be aware of the following three changes related to the Affordable Care Act’s Employer Shared Responsibility Payment (“ESRP”).
First, the Act codifies the IRS’s practice of allowing employers to substitute an individual’s date of birth for the individual’s Tax Identification Number (“TIN”) on a Form 1095-C when the TIN is unavailable. Applicable Large Employers (“ALEs”) (employers with 50 or more full-time and full-time equivalent employees under the Affordable Care Act’s calculation) are required to prepare and file written statements describing the health insurance, if any, that the ALE offers to eligible employees. An ALE can meet this requirement by completing and filing a Form 1095-C for each eligible employee. In Parts I and III of Form 1095-C, employers have to input the SSN or other TIN for each employee and individual covered by the employer’s health plan. There is also an option to input the individual’s date of birth on the Form 1095-C. The Act formally approves the practice of allowing a date of birth to substitute for a SSN or other TIN on the Form 1095-C.
Second, the Act extends the time an employer has to respond to a Letter 226-J from 30 days to 90 days. A Letter 226-J is the initial letter the IRS sends ALEs to notify them that they may have violated the ESRP. It is important for any ALE that receives a Letter 226-J to timely respond to the IRS. Previously, the response time was a quick 30 days unless the IRS approved a request for an extension. In that short timeframe, ALEs had to gather information to respond to the IRS’s proposed assessment that the ALE had either not offered substantially all full-time employees minimum essential coverage or had offered coverage that was not affordable or did not provide minimum value. The Act now gives employers more time, 90 days, to respond to a Letter 226-J.
Third, the Act implements a six-year statute of limitations for the IRS to collect penalties under the ESRP. The six-year period begins on the due date for filing a Form 1095-C, or, if later, the date the Form 1095-C was actually filed. Previously, there was no statute of limitations for the IRS to assess such penalties.