The IRS has issued proposed regulations that would make permanent certain compliance extensions related to health coverage information reporting under the Affordable Care Act (ACA) (86 Fed. Reg. 68939 (Dec. 6, 2021)). Until now, these extensions have been issued through annual IRS notices. The proposed regulations would provide an automatic time extension for employers with self-funded health plans, health insurers, and certain other entities to provide individuals their Forms 1095-B. The proposed regulations would also include an alternative method of providing Forms 1095-B in certain situations. In addition, the proposed regulations would contain an automatic extension for large employers to provide Forms 1095-C to their full-time employees. These forms are part of the ACA's information reporting and disclosure provisions (see Practice Note, ACA Information Reporting: Forms 1095-C and 1094-C (Overview)).

The proposed regulations would provide automatic extensions for the deadlines for certain ACA information reporting requirements applicable to:

For analysis of the ACA information reporting requirements, see Practice Notes:

As background, Code Section 6055 requires employers with self-insured health plans, health insurers, and other providers of MEC to file and furnish annual information returns and statements regarding coverage provided. Information provided under Code Section 6055 was used to enforce the ACA's individual mandate (26 U.S.C. § 5000A; see Practice Note, Affordable Care Act (ACA) Overview: Individual Mandate).

Code Section 6056 requires large employers (in general, those with 50 or more full-time employees in the previous year) to file and furnish annual information returns and statements regarding the health insurance, if any, offered to their full-time employees.

In addition, Code Section 6721 imposes a penalty for either:

(26 U.S.C. § 6721.)

Code Section 6722, meanwhile, imposes a penalty for either:

(26 U.S.C. § 6722.)

These penalty provisions apply to ACA information returns and statements required under Code Sections 6055 and 6056.

Last year, the IRS extended the deadline for furnishing individuals their 2020 Forms 1095-C and 1095-B, as applicable, from January 31, 2021, to March 2, 2021 (Notice 2020-76). The extended due date applied automatically and did not require submission of a request or other documentation to the IRS. However, this extension did not apply to the deadline for furnishing information returns to the IRS. Because of the automatic extension, rules allowing the IRS to grant an extension of up to 30 days to furnish Forms 1095-C and 1095-B did not apply.

In comments provided in response to Notice 2020-76, employers, health insurers, and other entities indicated that the current January 31 deadline for furnishing Forms 1095-C and 1095-B are generally difficult to meet. Among other reasons, this is because reporting requires some employers—on a compressed timetable—to:

Because this information also reflects the month of December, these activities cannot be completed until after the end of the year.

The proposed regulations would amend the rules under Section 6055 to give reporting entities an automatic extension of up to 30 days to furnish individuals Forms 1095-B. As a result, Forms 1095-B would be timely if furnished no later than 30 days after January 31 of the calendar year after the calendar year in which MEC is provided. If the extended furnishing date falls on a weekend day or legal holiday, the Forms 1095-B would be timely if furnished on the next business day. This automatic 30-day extension would replace:

Effective beginning in 2019, the TCJA reduced to zero the penalty for violating the ACA's individual mandate. As a result, individuals do not need the information on Form 1095-B to determine their federal tax liability or file a tax return with the IRS. Because reporting entities must expend resources to furnish Forms 1095-B, Notice 2020-76 provided relief—for 2020—from Code Section 6722 penalties for failures to furnish Forms 1095-B to individuals. However, this relief was only available if a reporting entity:

(See also Practice Note, ACA Information Reporting: Forms 1095-C and 1094-C (Overview): Short-Term Penalty Relief for Good Faith Compliance.)

The proposed regulations also include an alternative method for furnishing Forms 1095-B. Under this alternative method:

This alternative furnishing method will apply only to tax years when employer mandate penalties are zero.

Under the proposed regulations, self-insured large employers may use the Form 1095-B furnishing relief for:

Importantly, however, large employers may not use this alternative furnishing method for full-time employees who are enrolled in the self-insured plan.

The proposed regulations would amend the rules under Section 6056 to give reporting entities an automatic extension of up to 30 days to furnish individuals their Forms 1095-C. Because this extension is automatic, the proposed regulations would eliminate a requirement under existing regulations that large employers submit a written application to the IRS showing good cause or to otherwise request an extension of time to furnish these statements (26 C.F.R. § 301.6056-1(g)(1)(ii)(A)).

Under the proposed regulations, Forms 1095-C provided to full-time employees would be timely if furnished no later than 30 days after January 31 of the calendar year (and consistent with governing IRS procedures and instructions). If the extended furnishing date falls on a weekend day or legal holiday, statements would be considered timely furnished if provided on the next business day. This automatic 30-day extension would replace:

In past years, the IRS provided transition relief for Code Sections 6721 and 6722 penalties involving incorrect or incomplete information reported on a statement or return. The relief applied to reporting entities that could show they made good-faith efforts to comply with the Code Section 6055 and 6056 information reporting requirements (that is, furnishing individual statements and filing information returns with the IRS).

This transition relief applied to missing and inaccurate taxpayer identification numbers, dates of birth, and other information required on the individual statement or information return. The transition relief was not available to entities that:

In Notice 2020-76, however, the IRS indicated that 2020 was the last year the IRS would make available this transition relief.

The transitional good faith relief from Code Sections 6721 and 6722 penalties for reporting incorrect or incomplete information on information returns or statements is not available for reporting for 2021 and later tax years.

Group health plans, health insurers, service providers, and their advisors will no doubt welcome the certainty of not having to wait each year for an IRS notice to know the applicable deadlines for providing ACA information reporting statements to individuals. Notably, the proposed extensions would not apply regarding the deadlines for filing ACA information reporting forms with the IRS.