Key Highlights of the Paperwork Burden Reduction Act (PBRA)

The PBRA aims to reduce unnecessary paperwork for employers and employees when reporting health insurance coverage. Effective for tax forms beginning with the 2024 calendar year, here are the main changes:

• No Automatic Distribution: Employers are no longer required to send 1095-B and 1095-C forms to covered individuals unless those individuals specifically request them.
• Notification Requirement: Employers must notify individuals of their right to request a tax form.
• Timeline for Requests: If a covered individual requests a 1095-C form, the employer must provide it by January 31 or within 30 days of the request, whichever comes later.

What This Means: Forms that would have been automatically distributed in January 2025 will now only need to be sent out upon request, reducing administrative workload for employers.

Key Highlights of the Employer Reporting Improvement Act (ERIA)

The ERIA focuses on improving the reporting process for large employers (those with 50+ full-time employees) and providing relief for responding to IRS assessments. Here’s how it impacts employers starting with tax forms due after December 31, 2024:

• TIN Flexibility: Employers can now use an individual’s date of birth instead of their Tax Identification Number (TIN) if the TIN isn’t available.
• Electronic Forms: Codifies the IRS practice of allowing 1095-B and 1095-C forms to be offered electronically if the individual previously consented. Individuals can revoke this consent in writing.
• Extended Response Time for IRS Notices: Employers now have 90 days to respond to Letter 226-J (a notice of proposed penalty assessments for ACA reporting violations), up from the previous 30-day window.
• Statute of Limitations: Implements a six-year statute of limitations for the collection of penalty assessments.

What This Means: These changes provide employers with more flexibility and time to manage ACA compliance and respond to IRS inquiries effectively.

Takeaways for Employers

With these laws now in place, employers should take the following steps:

Update Internal Policies: Review and update your processes for ACA reporting to align with the new rules under PBRA and ERIA.

Educate Employees: Inform your workforce of their right to request 1095-B and 1095-C forms and communicate any changes to how these forms are distributed.

Leverage Technology: Consider electronic distribution of tax forms for employees who’ve provided consent, as this simplifies reporting processes.

Prepare for IRS Changes: Ensure your HR and payroll teams are prepared for the extended timelines and new reporting flexibility when responding to IRS notices.