Legislation Simplify’s Employer ACA Reporting: Key Legislative Changes For 2025

Summary

Congress recently passed two bills to alleviate the burden of employer reporting under the Affordable Care Act (ACA), which President Biden signed into law on December 23, 2024. These laws introduce significant changes that reduce administrative tasks for employers and insurance carriers.

Situation & Complication

Employers, particularly those with self-funded and level-funded health plans, have historically been required to furnish Forms 1095-C and 1095-B to covered individuals and file these with the IRS. These processes have been time-consuming and costly. The new laws modify these obligations, but states with their own individual mandates may not follow suit, creating potential compliance challenges.

Resolution

The two new laws—The Paperwork Burden Reduction Act and The Employer Reporting Improvement Act—introduce key changes aimed at reducing administrative strain while maintaining compliance with federal requirements.

Paperwork Burden Reduction Act

• Employers and carriers can now furnish Forms 1095-C and 1095-B only upon request, eliminating the blanket requirement to send them to all employees.

• Employers using this relief must:

  • Provide the forms within 30 days of a request or by January 31, whichever is later.

  • Notify employees about the new request-based process (guidance on proper notice distribution is pending).

• The law applies to tax year 2024 and beyond.

• Even if employers opt for the request-based method, they must still file Forms 1095-C and 1094-C (or Forms 1095-B and 1094-B) with the IRS by March 31, 2025.

• Employers in states with individual mandates (California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia) should confirm state-specific reporting requirements, as some may still require blanket distribution.

  
  

Employer Reporting Improvement Act

• Employers and carriers may now use a date of birth instead of a Social Security Number if the employee’s tax identification number is unavailable.

• Formalizes the ability to furnish forms electronically if the individual consents to electronic delivery.

• Extends the response window for IRS Letter 226-J (Employer Shared Responsibility Assessment) from 30 to 90 days for tax years beginning after 2023.

• Establishes a six-year statute of limitations on employer shared responsibility penalties (previously indefinite).

Business Case

While these legislative changes offer much-needed relief, timing presents challenges, particularly given the March 3, 2025, deadline for 2024 reporting.

Employer Action Steps

✅ Decide whether to use the request-based method for Forms 1095-C and 1095-B. If so, ensure proper employee notification (awaiting IRS guidance).✅ Monitor state requirements for individual mandates—some states may still require universal form distribution.✅ Consider maintaining traditional mailing for 2024 and transitioning to the new method for 2025 reporting (due in 2026) to allow time for compliance adjustments.✅ Ensure IRS filings remain timely even if opting out of universal distribution—Forms 1095-C and 1094-C must still be filed.✅ Check deadlines on IRS Letter 226-J assessments, as extended response timeframes apply only to penalties for 2024 and beyond.

These reforms mark a positive shift for employers, reducing administrative burdens while maintaining ACA compliance. Employers should stay updated on IRS guidance and state-level mandates to ensure a smooth transition.

References:

• Congress.gov Bill Summary: https://www.congress.gov/bill/118th-congress/house-bill/3797

• Form 1095-C: https://www.irs.gov/pub/irs-pdf/f1095c.pdf

• Form 1094-C: https://www.irs.gov/pub/irs-pdf/f1094c.pdf

Disclaimer: This document provides a general overview of employer reporting requirements and should not be considered legal or tax advice. Employers should consult legal or tax professionals for specific compliance guidance.