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IRS Announces Changes with 2020 ACA Reporting Forms and Instructions

On October 15, 2020, the Internal Revenue Service (IRS) released final versions of the 2020 Affordable Care Act (ACA) reporting forms and instructions.

While considerable changes were expected to account for individual coverage HRAs (ICHRAs), the IRS also renewed certain relief that will impact every applicable large employer (ALE).

Updates Impacting ALEs Offering ICHRAs

The U.S. Departments of Treasury, Labor and Health and Human Services issued a final rule permitting employer to offer ICHRAs, beginning in 2020, to satisfy the requirements of the ACA employer mandate. Below are the applicable reporting changes for ALEs who choose to implement ICHRAs:

  • Coverage code type – ALEs must use code G on Form 1095-B, line 8 to indicate an ICHRA was offered.
  • Eight new ICHRA offer codes on Form 1095-C
    • 1L – ICHRA offered to employee only with affordability determined by employee’s primary residence location ZIP code.
    • 1M – ICHRA offered to employee and dependent(s) (not spouse) with affordability determined by using employee’s primary residence location ZIP code.
    • 1N – ICHRA offered to employee, spouse and dependent(s) with affordability determined by using employee’s primary residence location ZIP code.
    • 1O – ICHRA offered to employees only using the employee’s primary employment site ZIP code affordability safe harbor.
    • 1P – ICHRA offered to employee and dependent(s) (not spouse) using the employee’s primary employment site ZIP code affordability safe harbor.
    • 1Q – ICHRA offered to employee, spouse and dependent(s) using employee’s primary employment site ZIP code affordability safe harbor.
    • 1R – ICHRA that is NOT affordable offered to employee; employee and spouse, or dependent(s); or employee, spouse and dependents.
    • 1S – ICHRA offered to an individual who was not a full-time employee.
    • 1T-1Z – These codes were reserved for future use.
  • Age – If offered an ICHRA, an ALE must enter in Part II of Form 1095-C the age of an employee, as of January 1, 2020.
  • Zip Code – If offered an ICHRA, an ALE must enter the ZIP code used for identifying the lowest-cost silver plan.

Updates Impacting All ALEs

  • Plan start month – ALEs must enter a two-digit number (01-12) on Form 1095-C (optional prior years).
  • IRS Notice 2020-76 Relief:
    • 30-day extension to furnish statements – The due date to furnish Forms 1095-B and 1095-C to individuals is extended from January 31, 2021, to March 2, 2021. Notably, the extension does not extend the IRS filing deadline for any of the 2020 ACA forms.
    • Relief for failure to furnish B statements – The IRS will not impose a penalty for failure to furnish Form 1095-B to individuals provided:
      • The ALE posts a notice conspicuously on its website stating that individuals may request a copy of their Form 1095-B; and
      • The ALE furnishes the Form 1095-B within 30 days of receiving the request.

      This furnishing relief also extends to Form 1095-C for employees enrolled in an ALE’s self-insured health plan who are not full-time employees for any month in 2020.

    • Extension of good faith relief for reporting and furnishing – The IRS will not impose a penalty for incorrect or incomplete reporting on Forms 1095-B and 1095-C provided there is a good faith effort to comply with the requirements.

Next Steps

While there are several changes, the most substantive apply to ALEs offering ICHRAs. ALEs must familiarize themselves with the new fields to ensure they have the required information to report appropriately and timely.

The new ACA forms and accompanying instructions can be accessed below:

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