2025 Updates to ACA Reporting Requirements
In a bipartisan effort to modernize healthcare compliance, the U.S. Senate has passed the Employer Reporting Improvement Act (the “Act”), which is now awaiting President Biden’s signature. These updates are designed to streamline compliance processes, enhance privacy protections, and provide clarity for employers.
What’s Changing?
1. SIMPLIFIED REPORTING ON INDIVIDUAL COVERAGE INFORMATION
Change: Allows employers and health insurance providers to report the names and dates of birth of spouses and dependents in lieu of tax identification numbers on Forms 1095-B and 1095-C.
Result: Reduces compliance hurdles while bolstering individual privacy by limiting the need for TINs.
2. ELECTRONIC DISTRIBUTION OF FORMS
Change: Employers and health insurance providers will be permitted to electronically distribute Forms 1095-B and 1095-C to covered individuals. This practice, already allowed by the IRS, is now officially codified.
Result: Reduces administrative burdens and mailing costs while aligning with modern digital practices.
3. EXTENDED RESPONSE PERIOD FOR IRS ASSESSMENTS
Change: Large employers (50+ full-time employees) facing assessments for failing to provide adequate, affordable minimum essential coverage will benefit from an extended response window. The Act increases the response period for initial IRS assessments from 30 days to 90 days.
Result: Offers more time to employers to address discrepancies or prepare appeals without requiring routine extension requests.
4. DEFINED STATUTE OF LIMITATIONS FOR PENALTIES
Change: The Act introduces a six-year statute of limitations for the IRS to collect penalties related to ACA employer-shared responsibility requirements. Previously, the IRS operated without a clear time limit, creating uncertainty for employers.
Result: Provides clarity and encourages employers to maintain thorough records for at least six years.
Next Steps for Employers
1. STAY INFORMED
Monitor the Act’s progress through Congress and prepare for compliance upon enactment.
2. EVALUATE CURRENT PRACTICES
Review ACA reporting processes to incorporate the new flexibility for reporting dependent and spouse information.
Assess the feasibility of transitioning to electronic distribution for forms to streamline operations.
3. ADJUST DOCUMENT RETENTION POLICIES
Update policies to ensure detailed records are maintained for at least six years to align with the new statute of limitation.
