On October 15, 2020, the IRS released the final 2020 versions of Forms 1094-B, 1095-B, 1094-C, and 1095-C, along with final instructions on how to complete the 1094/5-B Forms and the 1094/5-C Forms. “Applicable large employers” (ALEs) and all self-insured employers (including level-funded employers) will use these IRS forms to complete 2020 Affordable Care Act (ACA) reporting, which is due March 1, 2021 (for paper filing) and March 31, 2021 (for electronic filing). Employers (or their ACA reporting vendor) must also distribute Forms 1095-C to plan participants by March 2, 2021.
Who must complete ACA reporting?
Applicable large employers or “ALEs” and all self-insured/level-funded employers must complete ACA reporting and distribution requirements.
- ALEs: Employers with 50+ full-time and full-time equivalent employees on average, in 2019, are ALEs in 2020 and will be required to submit 2020 ACA reporting (using Forms 1094/5-C). ALEs must also distribute Forms 1095-C to plan participants. It is important to note that employers who are a part of a control group (e.g. parent-subsidiary, brother-sister companies), must count all employees in the control group of corporations when determining ALE status.
- Self-insured non-ALEs: Employers who were not ALEs in 2020 but who sponsored self-insured or level-funded plans must also complete ACA reporting (using Forms 1094/5-B) and must also distribute Forms 1095-B to plan participants.
The reporting and distribution requirements are outlined below:
|Fully Insured Plan||Self-Insured and Level Funded Plans|
|Non-ALE (Small Employer)||– Not required to file or distribute forms.|
– Insurer: Provides 1095-B to plan participants.
|– File Forms 1094/5-B|
– Distribute Forms 1095-B to plan participants (alternatively, employers can also post a notice, as outlined below)
|ALE||– File Forms 1094/5-C (Part III will not be completed)|
– Distribute Forms 1095-C to full-time employees
– Insurer: Provides 1095-B to plan participants.
|– File Forms 1094/5-C (with Parts I, II, and III completed)|
– Distribute Forms 1095-C to full-time employees (for non-full-time employees, employers can post a notice, as outlined below)
What changes have been made to 2020 ACA reporting?
Beginning in 2020, ALEs had the option of using “individual coverage health reimbursement arrangements” (ICHRAs) to satisfy their obligation under the ACA employer mandate to offer affordable coverage to full-time employees. ACA reporting for the 2020 calendar year accommodates the introduction of ICHRAs in Forms 1095-B/C and its instructions.
The ICHRA-specific changes and additional 2020 changes to ACA reporting are outlined below:
Changes relevant to all employers
- Extended deadline to distribute Forms 1095-B/C: The IRS extended the employer deadline to distribute Forms 1095-B/C to plan participants from January 31, 2021 to March 2, 2021. For more on this deadline extension, see our blog.
- Relief for good-faith reporting and distribution: Consistent with past 2015 to 2019 ACA reporting, the IRS will not impose penalties for “incorrect or incomplete” ACA reporting or form distribution if employers can show they made good-faith efforts to comply. This penalty relief does not apply to employers who fail to file reporting or distribute forms on time. The IRS states that this is the last time they intend to provide this good-faith relief. For additional information, see our blog.
Changes to Forms 1094/5-B relevant to Small Self-Insured or Level-Funded Employers
- Relief for failure to distribute Forms 1095-B to plan participants: For the second year in a row, the IRS will provide penalty relief for small self-insured (or level-funded) employers who fail to distribute Form 1095-B to plan participants if the following two conditions are met:
- Employers post a prominent notice on their website stating that individuals may receive a copy of their 2020 Form 1095-B upon request (the notice must be accompanied by an email address, phone number and a physical address to where the request can be sent); and
- Employers furnish a 2020 Form 1095-B within 30 days of any request (these statements may be furnished electronically if the employer meets certain requirements, including obtaining affirmative consent to the electronic delivery, consistent with Treasury Regulation §1.6055-2).
- Changes to Accommodate ICHRAs: In Form 1095-B, a new code “G” must be entered on line 8 to identify the use of an employer-sponsored ICHRA.
Changes to Forms 1094/5-C relevant to ALEs
The final versions of Forms 1094/5-C were not changed from the draft versions the IRS released in July, which we reviewed extensively in this blog article.
- Plan Start Month on Form 1095-C: In Part II of Form 1095-C, employers are now required to fill in the two-digit number that represents the month in which their plan year began. For instance, an employer with a plan year that began in January 2020, would fill in “01.” Although this field appeared in prior years’ reporting, this is the first year the IRS is requiring employers to fill it in.
- Relief for Self-Insured ALEs for failure to distribute Forms 1095-C to non-full-time employees: The IRS will not impose penalties on self-insured ALEs who fail to furnish Forms 1095-C to employees who are not full-time for any month of 2020 and who were enrolled in a self-insured plan if certain notice requirements are met (as outlined in the “Relief for failure to distribute Forms 1095-B” section above).
- Changes to Accommodate ICHRAs: These ICHRA-specific changes to the Form 1095-C only impact employers who offered employees ICHRAs for purposes of meeting their obligations under the employer mandate.
- Changes to Form 1095-C: The 2020 Form 1095-C includes new ICHRA-specific sections and codes, including fields for employee age and zip code of primary residence or work address (which are used to calculate affordability). We review these line-by-line changes in our blog article.
- Changes to Instructions: The 2020 Form 1095-C instructions include newly expanded definitions, including “affordability” and “required employee contribution,” that incorporate the rules surrounding the use of ICHRAs. ICHRAs and the employer mandate requirements are more fully discussed in our blog article.
Employer Action Items
For employers who did not sponsor an ICHRA in 2020, the only significant change to 2020 ACA reporting will be the requirement to fill in the plan start month on Forms 1095-C. On the other hand, employers who sponsored ICHRAs in 2020 will be subject to new ACA reporting requirements and should be sure to fill in the new fields and review the applicable instructions carefully.
It is important for employers to work with a knowledgeable ACA reporting vendor, who can help guide employers through the 2020 changes to reporting. As always, employers should work with their vendors to complete their reporting and form distribution on time.
- Sequoia Blogs
- IRS Resources
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved