As part of the Tax Cuts and Jobs Act (TCJA), the Affordable Care Act’s (ACA) individual mandate penalty was repealed effective January 1, 2019; however, the TCJA did not repeal the employer mandate nor its reporting requirements. Employers should be prepared to respond to IRS Employer Shared Responsibility Provision (ESRP) penalty letters and continue to prepare for 2020 reporting, which will occur in the first quarter of 2021.
The IRS has released the final versions of its employer and provider reporting forms and instructions for 2020.
Links to the forms and instructions are below:
- Form 1094-C: https://www.irs.gov/pub/irs-pdf/f1094c.pdf
- Form 1095-C: https://www.irs.gov/pub/irs-pdf/f1095c.pdf
- Form 1094-C / 1095-C Instructions: https://www.irs.gov/pub/irs-pdf/i109495c.pdf
- Form 1094-B: https://www.irs.gov/pub/irs-pdf/f1094b.pdf
- Form 1095-B: https://www.irs.gov/pub/irs-pdf/f1095b.pdf
- Form 1094-B / 1095-B Instructions: https://www.irs.gov/pub/irs-pdf/i109495b.pdf
Additional IRS guidance can be found here:
Forms and Instructions for Prior Years:
IRS Tool for Determining ALE Status and Potential Penalty Exposure
Q/A’s on Reporting by Health Coverage Providers (Section 6055):
Q/A’s on Reporting of Offers of Health Coverage by Employers (Section 6056):
Q/A’s about Information Reporting by Employers on Form 1094-C and Form 1095-C:
Q/A’s on Employer Shared Responsibility Provisions Under the ACA:
This guide reviews the 2020 forms and instructions and notes relevant changes from 2019. It also addresses IRS guidance on the solicitation of social security numbers (“SSNs”) or taxpayer identification numbers (“TINs”) and the treatment of cash “opt-out” payments for reporting purposes. It also provides guidance for employers that receive Letter 226J, Notice of a proposed Employer Shared Responsibility Payment, Letter 5699, Request for ACA Reporting Forms, or Letter 972CG, Late Filing, Missing/Incorrect TIN, or Failure to File Electronically Forms.
The reporting requirements are complex, due in part to how the health care reform law was drafted. The Affordable Care Act added two sections to the Internal Revenue Code: Sections 6055 and 6056. The sections are found next to each other in the Code; however, they apply to different types of entities. Section 6055 applies to providers of health insurance, such as health insurance carriers and employers that sponsor self-insured plans. Section 6056 applies to “applicable large employers” or “ALEs”, which are employers with 50 or more full-time equivalent employees in the prior calendar year.
To further complicate things, the reporting forms come in two different “series” – the B-Series and the C-Series forms. Employers may use either or both sets depending on their company size and whether their group health plan is self-insured or fully insured. Our goal with this guide is to provide some clarity and best practices for employers.
On October 26, 2020, the Internal Revenue Service (IRS) released Revenue Procedure 2020-45, which maintains the health flexible spending account (FSA) salary reduction contribution limit from 2020, which is $2,750, for plan years beginning in 2021. Thus, for health FSAs with a carryover feature, the maximum carryover amount is $550 (20% of the $2,750 salary reduction limit) for plan years beginning or ending in 2021. The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code.
Qualified Commuter Parking and Mass Transit Pass Monthly Limit Increase
For 2021, the monthly limits for qualified parking and mass transit are $270 each (which remain the same from 2020).
Adoption Assistance Tax Credit Increase
For 2021, the credit allowed for adoption of a child is $14,440 (up $100 from 2020). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $216,660 (up $2,140 from 2020) and is completely phased out for taxpayers with modified adjusted gross income of $256,660 or more (up $2,140 from 2020).
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Increase
For 2021, reimbursements under a QSEHRA cannot exceed $5,300 (single) / $10,700 (family), an increase of $50 (single) / $100 (family) from 2020.
Reminder: 2021 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits
Earlier this year, the IRS announced the inflation adjusted amounts for HSAs and high deductible health plans (HDHPs).
|2021 (single/family)||2020 (single/family)|
|Annual HSA Contribution Limit||$3,600 / $7,200||$3,550 / $7,100|
|Minimum Annual HDHP Deductible||$1,400 / $2,800||$1,400 / $2,800|
|Maximum Out-of-Pocket for HDHP||$7,000 / $14,000||$6,900 / $13,800|
The ACA’s out-of-pocket limits for in-network essential health benefits have also increased for 2021. Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit if the family out-of-pocket limit is above $8,550 (2021 plan years). Exceptions to the ACA’s out-of-pocket limit rule are also available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). Unless extended, relief for Grandmothered plans ends December 31, 2021.
|2021 (single/family)||2020 (single/family)|
|ACA Maximum Out-of-Pocket||$8,550 / $17,100||$8,150 / $16,300|
ACA Reporting Penalties (Forms 1094-B, 1095-B, 1094-C, 1095-C)
The table below describes late filing penalties for ACA reporting. The 2021 penalty is for returns filed in 2021 for calendar year 2020, and the 2022 penalty is for returns filed in 2022 for calendar year 2021. Note that failure to issue a Form 1095-C when required may result in two penalties, as the IRS and the employee are each entitled to receive a copy.
|Penalty Description||2022 Penalty||2021 Penalty|
|Failure to file an information return or provide a payee statement||$280 for each return with respect to which a failure occurs||$280 for each return with respect to which a failure occurs|
|Failures corrected within 30 days of required filing date||$50||$50|
|Failures corrected by August 1||$110||$110|
|Failure to file an information return or provide a payee statement due to intentional disregard||$570 for each return with respect to which a failure occurs (no cap)||$560 for each return with respect to which a failure occurs (no cap)|
The IRS recently issued Notice 2020-76 to:
- Extend the due date for furnishing forms under Sections 6055 and 6056 for 2020 from Feb. 1, 2021, to March 2, 2021.
- Provide a final extension of good-faith transition relief from penalties related to 2020 information reporting under Sections 6055 and 6056.
- Provide additional penalty relief related to furnishing 2020 forms to individuals under Section 6055. Under this relief, employers will only have to provide Form 1095-B to covered individuals upon request.
The due date for filing forms with the IRS for 2020 remains March 1, 2021 (since Feb. 28, 2021, is a Sunday), or March 31, 2021, if filing electronically.
The IRS is encouraging reporting entities to furnish 2020 statements as soon as they are able. No request or other documentation is required to take advantage of the extended deadline.
Each year, the Kaiser Family Foundation and the Health Research & Educational Trust conduct a survey to examine employer-sponsored health benefits trends. Request a full summary from HealthSure for more details.
Plan Enrollment Trends
The following were the most common plan types in 2020:
- Preferred provider organizations (PPOs)—47% of workers covered
- High deductible health plans with a savings option (HDHP/SOs)—31% of workers covered
- Health maintenance organizations (HMOs)—13% of workers covered
- Point-of-service (POS) plans—8% of workers covered
Health Insurance Premiums
The average premium rose 4% for both single and family coverage over the past year—around $7,470 and $21,342 respectively.
Workers contributed $1,243 and $5,588 toward their premiums for single and family coverage, respectively.
Self-funded plan enrollment increased over the past year, with 23% of workers with small employers enrolled in either a partially or entirely self-funded plan, compared to 84% of workers with large employers.
Contact us for more information on benefits offerings or what you can do to control your health care costs.