Good Faith Relief Ending for ACA Reporting Forms in 2022

As it relates to the Affordable Care Act (ACA) employer reporting process, good faith compliance is soon ending. Although the IRS provided some relief related to the deadlines for delivering ACA reporting forms to employees, it has reiterated what employers had feared: good faith relief is ending.

Until now, every year since federal law has required ACA reporting forms, the IRS took the position that it would not assess penalties based on incorrect forms if the employer made “good faith” efforts to comply. In other words, the IRS would not assess penalties if an employer made minor errors or failed to include required information on reporting forms. That policy is now outdated.

This has serious financial ramifications for employers, since the penalty for any mistake may cost them up to $560 per form – $280 for an incorrect form provided to an employee and $280 for providing an incorrect form to the IRS. These penalty amounts are typically adjusted for cost-of-living increases. 

Employers may still have their assessed penalties waived if they demonstrate “reasonable cause” for the mistake. This standard is a stricter burden to meet than good faith. Also, it does not arise until the IRS assesses the penalty, so penalty abatement may be a more time-consuming process, and there is no guarantee that the IRS will waive the penalties.

As the IRS begins to focus more than ever before on the accuracy of forms, both 2021’s and future years’, it is critical for employers to thoroughly review Forms 1094-C and 1095-C for accuracy. While it may be impossible to review every single form issued to an employee and to the IRS, the following tips should help to accurately check the relevant ACA reporting forms:

General Documentation Tips:

  1. Save any backup documentation of coverage offers, premium costs, and related information to demonstrate the accuracy forms when necessary.
  2. Review reporting vendor contracts to determine which party is responsible for mistakes. The IRS will look to the employer if a form is incorrect.
  3. The sooner vendors provide advance drafts of the forms, the better the opportunity to review them.
  4. For 1094-C Forms:
  • Review the forms closely. Ensure the correct information appears on Form 1094-C and you check the correct boxes.
  • Check the Aggregated ALE Group box if the tax ID number for which you are filing is the aggregated filer in the controlled group.
  • Make sure that Part III, Column A reflects the correct answer regarding the 95% MEC offer of coverage.
  • Make sure that Part IV contains all controlled group tax ID numbers (if applicable).
  1. For Forms 1095-C:
  • Review a curated sampling of forms to look for errors. Focus on unique cases such as rehired employees, change in status employees (full-time to part-time and part-time to full-time), employees that transitioned to COBRA, and employees that took a leave of absence. 
  • If applicable, make sure the applicable forms reflect the correct affordability safe harbor. If inapplicable, review to ensure the accuracy of the monthly premium amount.
  • Ensure every “1” code has a corresponding and applicable “2” code.
  • Ensure completion of Part III for both level-funded and self-funded plans – include all employee and covered dependent information.
  • Ensure that you are not filing 1095-C forms for individuals who are not employees.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.
%d bloggers like this: