Seyfarth Synopsis: Recently the U.S. Treasury Department (Treasury) and Internal Revenue Service (IRS) issued regulations (the “Final Regulations”) which finalized previously proposed relief for furnishing Forms 1095-B and 1095-C to individuals. Notably, the Final Regulations provide a permanent 30-day extension to the due date for furnishing Form 1095-C to individuals. This extension was previously granted in the 2021 final instructions for completing Forms 1094-C and 1095-C for 2021 (see our blog here) issued in December 2021.
As background, 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 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. Each employee for whom reporting is required receives a Form 1095-C.
Notable highlights of the Final Regulations (available here), which apply to calendar years beginning after December 31, 2021, include:
Automatic Extension of Time To Furnish Statements
Consistent with the 2021 proposed rule and final instructions, the Final Regulations provide that employers have an automatic extension of time, not to exceed 30 days after January 31, in which to furnish Form 1095-C to individuals. If the extension ends on a weekend or legal holiday, statements will be timely if furnished on the next business day. (This extension replaces the 30-day extension that could have been requested for good cause.)
Alternative Manner of Furnishing Statements
For part-time employees and non-employees enrolled in a self-funded health plan, the Final Regulations provide that ALEs may use an alternative (and less onerous) manner of furnishing statements. ALEs may furnish Forms 1094-C or 1095-C to these individuals by posting “a clear and conspicuous notice” on the entity's website that includes an offer to provide individuals with a copy of their statement upon request. A Form 1094-C or Form 1095-C must be furnished to the requesting individual within 30 days of their request being received. (Note that ALEs that offer self-funded coverage to non-employees may use Forms 1094-B and 1095-B, rather than Form 1095-C to report coverage for those individuals.) The relief is not available to full-time employees whose Form 1095-C must still be distributed directly to them in accordance with the reporting rules.
Medicaid Coverage
The Final Regulations make permanent the guidance in Notice 2020–66 by clarifying that Medicaid coverage limited to certain COVID-19 testing and diagnostic services is not minimum essential coverage. Thus, eligibility for this coverage will not prevent an individual from qualifying for the premium tax credit.
Elimination of Good Faith Relief
ALEs that fail to comply with the reporting requirements may be subject to penalties for failure to file correct information returns and failure to furnish correct payee statements. Under transitional good faith relief, for calendar years 2016 – 2020, the IRS did not impose penalties on reporting entities if the entities could show that they made good faith efforts to comply with the information reporting requirements. The Final Regulations confirm that the transitional good faith relief from penalties was eliminated for calendar years after 2020 and is no longer appropriate. The preamble states that the reasonable cause exception provides adequate relief for filers who have reasonable cause for failing to timely or accurately complete their reporting requirements.
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