Assessing the Paperwork Burden Reduction Act: Benefits and drawbacks for 2024 taxes

In late December 2024, Congress passed the Paperwork Burden Reduction Act. The Act intends to ease the administrative burden of Affordable Care Act (ACA) reporting by way of its Form 1095 issuance requirements. The timing of when and how it passed, however, bring real challenges and concerns given the tax year 2024 process is already underway.

Background

For close to a decade, the ACA has required certain entities (employers and insurers) to issue Form 1095 to individuals who are offered coverage, or covered under, employer group health insurance programs. It also requires this information be electronically filed with the Internal Revenue Service (IRS). Changes implemented in the time since, most notably the elimination of the individual coverage mandate, have reduced the intended purpose behind physical forms issuance. In 2020, the IRS provided relief targeting physical form disclosures, however this flexibility primarily focused on “B” form issuance with limited exceptions and qualifiers that many employers were challenged to satisfy in order to confidently leverage it. The recently passed legislation expands this issuance relief to conditionally include all 1095 issuance.

The calendar year 2024 forms issuance deadline is March 3, 2025. The electronic filing deadline is March 31, 2025.

What it allows

Going forward, employers do not have to automatically provide Forms 1095-B or 1095-C under two key conditions. First, they must adequately notify individuals of their right to request a copy. Second, employers also must have a process in place to support providing the requested copy and generally must do so within 30 days of receiving the request. Separate and distinct electronic consent guidelines (previously enacted) must also continue to be supported when employers want to enable electronic distribution of forms, even if only by request.

The conditions

First, the employer must provide “clear, conspicuous and accessible notice” to all applicable individuals of their right to request a copy of Form 1095. Individuals who terminated employment and who were on COBRA are typically included in this population.

Second, and as mentioned above, the form must be provided by January 31 of the year, following the 1095 reporting year or within 30 days after receiving the request.

The challenges

The primary challenge with quickly adopting this change ties back to the presently limited amount of guidance regarding it. Specifically, this involves understanding how to execute the notification and request process requirements in ways that ensure compliance with what this relief allows. First and foremost is identifying what constitutes “clear, conspicuous and accessible notice” (model language would be beneficial). Also in need of clarification are the tracking required to monitor request fulfillment and the interplay with state reporting requirements.

This necessary guidance is important because not adopting the change properly would potentially expose the employer to non-issuance penalties the IRS has been leveeing throughout the lifespan of these reporting requirements.

In general, we are cautious when it comes to adopting changes relating to legislation enacted with limited guidance and within close reach of actionable deadlines. Such holds true in this instance. Therefore, our current position is the risk involved absent guidance at a federal level is not worth abandoning forms issuance for the 2024 reporting year. Guidance and additional time are needed for employers and administrators to determine how they can effectively and confidently manage the disclosure and request processes. Employers should focus their efforts on understanding how their related processes, either internal or via third-party support, need to be modified to support the notification and “request only” issuance elements. Of course, with this comes understanding any related cost implications associated with the change.

Additional information on this and other impactful legislative changes will be released throughout 2025. In the meantime, please contact us if you have any immediate questions.