Penalties for ACA Reporting

Employer Action Items

Proposed penalty assessments from the Internal Revenue Service (“IRS”) arising from an employer’s failure to comply with the ACA’s annual employer information reporting obligations seem to have a knack for sneaking up on unsuspecting employers. These assessments can also begin to add up quickly, so employers that are required to perform the annual information reporting requirements are encouraged to furnish and/or file their outstanding ACA Forms 1094-B, 1095-B, 1094-C and 1095-C (as applicable) as soon as possible. If an employer has thus far failed to fully and accurately perform its annual information reporting obligations (or otherwise failed to prepare and submit an IRS Form 8809, Application for Extension of Time of Time to File Information Returns), the employer should work expeditiously to resolve any outstanding reporting-related deficiencies. .

The April 1, 2024, filing deadline for applicable large employers and small employers sponsoring self-funded and/or level-funded group health plans during calendar year 2023 to prepare and submit their required Forms 1094-B, 1094-C, 1095-B and 1095-C (as applicable) has unfortunately already passed.  Potential IRS-imposed monetary penalties arising from the employer’s information reporting related deficiencies, as detailed in the following schedule of penalties:

• $60/form if filed within 30 days of the missed deadline;
• $120/form if filed after 30 days but before August 1;
• $310/form if filed August 1 or after; and,
• $630/form if the failure to file is intentionally disregarded by the underlying employer.

Note: There are annual maximums that may apply.

• Also, keep in mind that there are distinct penalties associated with the failure to furnish Form 1095-B or Form 1095-C (as applicable) to the plan’s covered persons or its covered full-time employees, but only to the extent such failure to furnish is not remedied on or before March 1, 2024 (respecting the 2023 calendar year reporting cycle).

Summary

Organizations that do not offer Minimal Essential Coverage (“MEC”) to at least 95% of their full-time employees and their dependents for any month in 2024, and for which one or more full-time employees receives a Premium Tax Credit (PTC) subsidizing their purchase of health insurance coverage through a state-mandated insurance exchange, or the federal ACA marketplace, may be subject to an IRS assessed monetary penalty, as detailed under IRC Section 4980H(a) (the “A Penalty”).

Remember, the 4980H(a) penalty, also called the “sledgehammer penalty” (due to its pass-fail nature), is calculated, and assessed by the IRS on a per-employee basis, taking into consideration the underlying employer’s total count of fulltime employees. Consequently, to the extent an employer fails to provide a qualifying offer of enrollment for a MEC-complaint health insurance product (as sponsored by the underlying entity) to less than 95% of the sum of its total population of fulltime employees, the employer shall be assessed an applicable 4980H(a) noncompliance penalty.

More Information

Please visit the IRS website at or see the December 2023 edition of The Baldwin Bulletin for additional and more comprehensive expert commentary regarding these significant ACA-imposed  information reporting obligations.

More information and resources related to the IRA’s changes to the Medicare Part D program are available on the CMS Part D Improvements webpage.

For questions regarding this Legislative Update or any other related compliance issues, please contact your Burnham Benefits Consultant or Burnham Benefits at 949‐833‐2983 or inquiries@burnhambenefits.com.

This Legislative Update was prepared by the Baldwin Regulatory Compliance Collaborative (the “BRCC”), a partnership of compliance professionals offering client support and compliance solutions for the benefit of the Baldwin Risk Partners organization, which includes: Jason Sheffield, BRP National Director of Compliance; Richard Asensio, Burnham Benefits Insurance Services; Nicole L. Fender, the Capital Group; Bill Freeman, AHT Insurance; Stephanie Hall, RBA/TBA; Caitlin Hillenbrand, AHT Insurance; Paul Van Brunt, Baldwin Krystyn Sherman Partners (BKS); and Natashia Wright, Insgroup.

Burnham Benefits and the BRCC do not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with applicable federal and state law requirements, and is based on our interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.