Key points:

• Employers must continue to file Forms 1095-C with the IRS, but are no longer required to provide forms to employees, except upon request. Employers must notify employees of the right to request the form.
• Employers now have 90 days, instead of only 30, to respond to an ACA penalty notice from the IRS.
• ACA penalty assessments are now subject to a six-year statute of limitations.

Under the Affordable Care Act (ACA), large employers (generally those with 50 or more full-time employees or full-time equivalents) must report annually to the IRS information about the health coverage offered to their full-time employees during the prior year using IRS Form 1095-C. The IRS uses the forms to assess whether an employer “shared responsibility” penalty applies. In past years, employers also had to provide copies of the forms to their full-time employees.

The recently-enacted Paperwork Burden Reduction Act and Employer Reporting Improvement Act made the following changes to ACA reporting requirements and penalty rules, effective for 2024 reporting:

• Instead of sending 1095-C forms to all full-time employees, employers may provide notice to employees of the right to request a copy of the form. Upon request, the form must be provided within 30 days, or, if later, by January 31 for the prior year’s form. The notice to employees must be “clear, conspicuous, and accessible.” The IRS is expected to issue guidance regarding the notice requirement.
• The IRS must provide employers with 90 days to respond to an ACA penalty assessment notice, known as a “226-J Letter.” In the past, the IRS gave employers only 30 days to respond and dispute any part of the penalty assessment. Employers still need to be alert and should respond within the 90 days to dispute a penalty assessment, because a failure to timely respond to a 226-J Letter results in a formal assessment that can be challenged only on appeal. In our experience, disputing an ACA penalty assessment on appeal is much more difficult than challenging the assessment in an initial response to a 226-J Letter.
• ACA penalty assessments are now subject to a six-year statute of limitations, which begins on the later of the deadline for filing the 1095-C forms, or the date the forms were actually filed. Previously, no statute of limitations applied to ACA penalty assessments.

Employers are still required to file Forms 1095-C, along with transmittal Form 1094-C, with the IRS, generally by March 31 each year, to report coverage offered in the prior year. If you have any questions regarding ACA compliance, please contact a member of the Hanson Bridgett Employee Benefits Group.