Congress Considering “Common Sense Reporting Law” to Streamline ACA Filings
Legislation introduced to the U.S. House of Representatives on September 21, if enacted, could simplify employers’ annual reporting through the Affordable Care Act (ACA) of health plan information to the IRS.
The bipartisan Commonsense Reporting Act of 2021 (HR 5318) was introduced by Representatives Mike Thompson, D-Calif., And Adrian Smith, R-Neb. A Senate version of the legislation is expected to be presented shortly, sponsored by Sen. Mark Warner, D-Va., And Rob Portman, R-Ohio.
Reduce reporting burden
Under current law, employers must report annual data to the IRS under sections 6055 and 6056 of the tax code during the year-end tax reporting season. These provisions require HR professionals to track data on a monthly basis.
The Commonsense Reporting Act would allow forward-looking reporting before the start of a new coverage year, depending on employee coverage during the current plan year.
Research from the Society for Human Resource Management (SHRM) shows that meeting these requirements costs employers a lot of time and money. If an employer is unable to submit IRS forms, he faces hefty financial penalties. On September 9, at the SHRM 2021 Annual Conference and Exhibition, more than 3,000 SHRM members called on Congress to act on legislation to streamline and modernize IRS reporting requirements for employers.
“With more than 300,000 human resources professionals and business leaders as members, SHRM appreciates the efforts of Congress to streamline and modernize health care benefit reporting requirements,” said Emily Dickens, Chief of Staff de SHRM, Head of Government Affairs and Secretary General. “Our members’ expertise includes administration and reporting on health care benefits. This effort will have a direct impact on their work.
According to a SHRM position statement:
“A more streamlined and proactive reporting system would reduce the burden on employers and the IRS. In addition, such an approach would alleviate compliance by allowing participating employers to transmit Form 1095 to employees electronically rather than requiring that each form be printed and mailed.
[SHRM members-only toolkit: Complying with the Affordable Care Act]
What the bill would do
As summarized by the Employer-Sponsored Coverage Partnership (P4ESC), which is made up of 16 professional associations, including SHRM, the Commonsense Reporting Act:
- Create a voluntary forward-looking reporting system. Allowing employers to voluntarily report coverage information about their health plan to the IRS, using current plan year data, could increase the accuracy of tax credit eligibility determinations exchange of the ACA market. State and federal facilitated exchanges would access information securely through a data services hub. The IRS would use the information to issue 226-J letter tax penalty notices more accurately.
- Protect the financial security of consumers and the privacy of individuals. ACA Exchanges would have a better verification tool and real-time employer plan information for determining tax credits, which could reduce the risk that an individual will have to reimburse the IRS the value of the trading plan. The bill also clarifies that the IRS can accept full names and dates of birth instead of Social Security numbers for dependents and spouses and requires the Social Security Administration to assist in the process of matching dependents. data.
- Protects employers and streamlines compliance burdens. By allowing an employer to prospectively report information about an ACA-compliant health plan, the bill reduces the threat that an employer will receive a 226-J letter tax penalty notice. It provides compliance relief by not requiring employers who choose to report prospectively to file, print, and mail Form 1095 to all enrolled employees, and allows electronic transmission of a Form 1095 upon individual request.
- Offers additional tax relief. The bill extends the appeal deadline for Letter 226-J from 30 days to 90 days, which better matches the needs of remote work and business operations during the pandemic and beyond. It establishes a statute of limitations for the levy of tax penalties for the employer’s mandate in order to align with other levies in the tax code and the limits on record keeping.
- Establishes report verification oversight. The Government Accountability Office would be required to study the functionality of the forward-looking reporting system, including the accuracy of the information collected, the number of employers choosing to report under such a system and any changes that have taken place.