ACA Compliance Updates: 1095 Distribution & Statute of Limitations

Finally, Some Good News on the Compliance Front! Well… Mostly.

Recent regulatory changes bring significant modifications to Affordable Care Act (ACA) compliance, offering notable benefits to employers. These changes, which are effective immediately, impact reporting requirements and employer penalty assessments. Here’s what C-suite executives and HR professionals need to know—and how these updates could influence the employer group market.

Streamlining 1095 Form Distribution

Since the ACA’s implementation, employers have been required to provide employees with Forms 1095-B or 1095-C, detailing their health coverage offerings. However, starting with the 2024 tax year (for distribution in early 2025), this requirement is significantly reduced.

Employers are no longer obligated to automatically distribute these forms to employees, provided they meet two conditions:

1. Employee Notification: Employers must inform employees that they will no longer automatically receive Form 1095 and provide instructions on how to request one.

2. On-Demand Provision: Employers must provide a requested Form 1095 within 30 days.

   
   

While the requirement to file Forms 1094 and 1095 with the IRS remains intact, this change presents a cost-saving opportunity by reducing administrative burdens associated with mass distribution. Employers should coordinate with their payroll and compliance vendors to ensure timely IRS filings and maintain processes for fulfilling employee requests.

Impact on Employers

• Cost Reduction: Savings on printing and mailing costs.

• Operational Efficiency: Less administrative oversight needed for mass distribution.

• Compliance Flexibility: Streamlined processes for managing reporting obligations.

  
  

ACA Penalty Statute of Limitations: A Welcome Clarification

A new six-year statute of limitations has been established for employer penalty assessments under the ACA. Previously, the IRS had no defined timeline for assessing penalties due to its

position that Forms 1094 and 1095 were not considered tax returns. This change provides a definitive timeframe, offering greater clarity for employers.

Key Benefits for Employers

• Predictability in Compliance Risks: Employers now have a clear limit on how long the IRS can assess penalties.

• Reduced Long-Term Exposure: In the past, delays in IRS enforcement meant companies could unknowingly accumulate multiple years of penalties before receiving notice.

• Improved Due Diligence in Mergers & Acquisitions: Buyers and sellers can better assess potential ACA compliance liabilities in corporate transactions.

Employers should review their ACA compliance processes, especially those with a history of penalty assessments, to ensure timely and accurate reporting moving forward.

HHS Rulemaking: Less Transparency for Regulatory Changes

A recent policy shift at the Department of Health and Human Services (HHS) eliminates the agency’s previous commitment to notice-and-comment rulemaking for certain policy decisions. Effective immediately, HHS will no longer be required to seek public input on regulatory changes related to loans, grants, benefits, and contracts unless legally mandated.

What This Means for Employers

• Reduced Public Oversight: Changes affecting health benefits programs could occur with less employer and industry input.

• Faster Policy Shifts: Employers may need to adapt more quickly to evolving HHS regulations.

• Increased Uncertainty: Future regulatory updates could be implemented with minimal notice, making proactive compliance planning more critical.

Employers should stay informed through industry groups and legal counsel to anticipate changes and adjust benefits strategies accordingly.

Final Thoughts

While the revised ACA reporting and penalty rules provide welcome relief, the shift in HHS rulemaking may introduce new complexities. Employers should take advantage of reduced reporting burdens but remain vigilant in tracking regulatory developments to avoid compliance pitfalls.

For HR professionals and executive teams, these changes reinforce the importance of staying proactive, leveraging expert guidance, and maintaining flexibility in benefits administration. Now is the time to review internal processes, update compliance protocols, and ensure readiness for the evolving regulatory landscape.