Seyfarth Synopsis: The IRS has released final instructions for completing Forms 1094-C and 1095-C for 2021. Notably the instructions provide that the due date for furnishing Form 1095-C to individuals is extended to March 2, 2022. As expected, the instructions no longer offer penalty relief for good faith incorrect or incomplete filings and Form 1095-C has been modified to add new codes 1T and 1U for individual coverage HRAs offered to the employee and spouse but not dependents.
Employers with 50 or more full-time employees (including full-time equivalent employees) in the previous year (“applicable large employers” or “ALEs”) use Forms 1094-C and 1095-C to report the information about offers of health coverage and enrollment in health coverage for their employees. Form 1094-C is used to report information for each ALE Member and to transmit Forms 1095-C to the IRS. Form 1095-C is used to report information about each employee to the IRS and to the employee.
In September of 2021, the IRS released draft Affordable Care Act (ACA) reporting forms and instructions which, among other things, added two new codes (1T and 1U) to Line 14 of Form 1095-C, removed references to relief from the requirement to automatically furnish Forms 1095-B and 1095-C, and removed the references to penalty relief for reporting incomplete or incorrect information if a good-faith effort to comply was made. On November 22, 2021, the Department of Treasury and the IRS issued proposed regulations which were intended to provide Form 1095 reporting relief. On December 9, 2021, the IRS issued final instructions for Forms 1094-C and 1095-C (the “Final Instructions”) providing the expected relief. Final instructions for Forms 1094-B and 1095-B were also issued, but not discussed here.
The Final Instructions implement aspects of both the draft instructions and proposed regulations. Some notable highlights are:
- Consistent with the proposed regulations, the Final Instructions make automatic, the 30-day extension – from January 31 to March 2, 2022 – for furnishing Form 1095-C to individuals.
- The Form 1095-C instructions include the two new codes (1T and 1U) that were included in the draft instructions. These codes are used when the applicable individual and their spouse receive an HRA offer of coverage from their employer, but exclude dependents as recipients of the HRA coverage.
- Forms 1095-C must be mailed to each full-time employee on or before March 2, 2022, unless the recipient consents to receive the statement electronically. However, an ALE Member may furnish the forms to employees who have been part-time at all times during 2021 and non-employees who are enrolled in the self-insured health coverage by posting the forms on the ALE Member’s website, provided certain requirements are met, including the following:
- The employer must provide clear and conspicuous notice, in a location on its website that is reasonably accessible to all individuals, stating that individuals may receive a copy of their statement upon request. The notice must include an email address, a physical address to which a request for a statement may be sent, and a telephone number that individuals may use to contact the employer with any questions.
- The employer must retain the notice in the same location on its website through October 17, 2022.
- The employer must furnish the statement to a requesting individual within 30 days of the date the request is received.
- The Final Instructions removed the good faith penalty relief references for reporting incomplete or incorrect information. The per-failure penalty remains unchanged at $280 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,426,000.
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