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The ACA requires large employers that sponsor fully insured or self-insured (including level funded) group health plans to report information to the IRS annually via Form W-2 regarding the cost of health coverage provided to employees during the prior calendar year. The reporting is intended for informational purposes.
The coverage must be reported on a calendar-year basis, regardless of the ERISA plan year or policy year. Specifically, employers must file copies of their annual Forms W-2 with the Social Security Administration by January 31 and provide applicable copies to their employees by the same deadline.
Currently, this ACA requirement applies to employers that filed 250 or more Forms W-2 in the prior calendar year. Employer aggregation rules do not apply for this purpose. In other words, the number of Forms W-2 is calculated separately without consideration of controlled groups. Self-insured plans that are not subject to COBRA (including church plans), multi-employer plans, and Indian tribal governments are exempt from the Form W-2 reporting requirement.
For further information, please ask your broker or consultant for a copy of the NFP publication ACA: Form W-2 Reporting Requirement.
On December 10, 2024, the US Senate passed the Employer Reporting Improvement Act and the Paperwork Burden Reduction Act by unanimous consent. Having already passed the House of Representatives by voice vote on June 21, 2023, these bills will now be sent to President Biden for his signature.
This legislation makes certain modifications to the ACA’s employer mandate reporting requirements that aim to simplify Forms 1095-B and 1095-C reporting for employers and health insurance providers, including:
- Providing statutory authority for the IRS’s allowance for employers to distribute copies of Forms 1095-B and 1095-C to employees and individuals only upon request. Employers would still be required to annually file Forms 1095-B and 1095-C with the IRS.
- Providing statutory authority to allow for an individual's date of birth to be substituted for the individual's taxpayer identification number (TIN) if the TIN is not available. The IRS already allows for this in certain circumstances.
- Providing statutory authority to more broadly allow employers and providers to electronically distribute Forms 1095-B and 1095-C to individuals. The IRS already allows for this in certain circumstances, but – more restrictively – only if each employee individually provides affirmative consent electronically.
- Extending to 90 days the deadline for applicable large employers (ALEs) (generally, employers with 50 or more full-time employees) to respond to a proposed shared employer responsibility payment assessment by the IRS (the so-called “226-J letter”). The IRS currently requires a response within 30 days.
- Establishing by statute a six-year statute of limitations for collecting assessments. The IRS currently takes the position that there is no statute of limitations on collecting assessments.
Most of these changes related to reporting would generally take effect with respect to returns due after December 31, 2024, subject, again, to President Biden’s signature.
The deadline for 2024 CAA gag clause attestations of compliance is December 31, 2024.
To review, the CAA prohibits group health plans and insurers from directly or indirectly entering contracts offering access to provider networks that contain certain types of “gag clauses.” In the healthcare context, gag clauses are contract terms that restrict information, including provider network rates and deidentified claims data, that plans or insurers can make available to another party, such as a business associate. An example is a provision in a TPA contract that prohibits the plan’s access to network rates because the TPA considers the information to be proprietary.
The CAA requires plans and insurers to annually attest to compliance with its gag clause prohibition for contracts entered since the first attestation made in 2023 via a CMS webform. With a fully insured plan, an insurer can agree to submit the required attestation on behalf of the plan. A self-insured or partially self-insured plan may satisfy the attestation requirement by entering into a written agreement under which the plan’s service provider(s), such as a TPA, submits the attestation for the plan; however, the plan remains responsible for compliance.
In October, we issued several reminders regarding the upcoming gag clause attestation deadline. However, if employers have not yet coordinated with their applicable carriers or plan service providers to ensure the attestations have been timely submitted, they should do so as soon as possible.
For further information on the gag clause prohibition and attestation requirements, please review the available resources on the designated CMS Gag Clause Prohibition Compliance Attestation website and ask your broker or consultant for a copy of the NFP publication CAA Gag Clause Prohibition and Attestation: A Guide for Employers.
On October 22, 2024, the IRS issued Revenue Procedure 2024-40, providing certain cost-of-living adjustments for a wide variety of tax-related items, including health FSA contribution limits, transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), the small business tax credit, and other adjustments for tax year 2025. Those changes are outlined below.
Health FSA. The annual limit on employee contributions to a health FSA will be $3,300 for plan years beginning in 2025 (up from $3,200 in 2024). In addition, the maximum carryover amount applicable for plans that permit the carryover of unused amounts is $660 (up from $640 in 2024).
Dependent Care Assistance Program (DCAP). The annual limit on employee contributions to a DCAP will remain at $5,000/$2,500 for 2025 and future years unless extended or amended by Congress.
Qualified Transportation Fringe Benefits. For 2025, the monthly limit on the amount that may be excluded from an employee's income for qualified parking increases to $325, as does the aggregate fringe benefit exclusion amount for transit passes (both up from $315 in 2024).
QSEHRAs. For 2025, the maximum number of reimbursements under a QSEHRA may not exceed $6,350 for self-only coverage and $12,800 for family coverage (up from $6,150 and $12,450 in 2024).
Adoption Assistance Program. The maximum amount an employee may exclude from his or her gross income under an employer-provided adoption assistance program for the adoption of a child will be $17,280 for 2025 (up from $16,810 in 2024). This exclusion begins to phase out for individuals with modified adjusted gross income greater than $259,190 and will be entirely phased out with a $299,190 modified adjusted gross income or more.
Small Business Healthcare Tax Credit. For 2025, the average annual wage level at which the credit phases out for small employers is $33,300 (up from $32,400 in 2024).
Employers with limits that are changing (such as for health FSAs, transportation/commuter benefits, and adoption assistance) will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.
Contact your NFP consultant for a copy of our Employee Benefits Annual Limits publication.
Unless an exception applies, each ERISA group health plan must file an annual report with the DOL via Form 5500 (Annual Return/Report of Employee Benefit Plan). The Form 5500 must be submitted electronically by the last day of the seventh month following the end of the plan year (e.g., July 31 for a calendar-year plan). A two-and-a-half-month extension of the Form 5500 due date will be automatically granted by filing a Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) on or before the normal due date.
The 2023 Form 5500 and instructions are accessible on the DOL website.
One important exception to the Form 5500 filing is for plans with fewer than 100 participants as of the beginning of the plan year that are unfunded, fully insured, or a combination of unfunded and fully insured. “Unfunded” refers to a plan that pays benefits from the employer’s general assets (and not through a trust or other funding vehicle). Additionally, group health plans sponsored by a government or church organization typically do not require a Form 5500 filing since these plans are not subject to ERISA.
Plans must maintain sufficient records to document information required by the plan’s Form 5500 for at least six years after the filing date of the Form 5500. As a practical matter, this means that records should be retained for approximately eight years from their creation, which considers the plan year for which the form is being filed and the subsequent filing period.
For further information on the Form 5500 filing and content, please ask your broker or consultant for a copy of the NFP publication Form 5500: A Guide for Employers.
The ACA imposed the PCOR fee on health plans to support clinical effectiveness research. The PCOR fee, which applies to plan years ending on or after October 1, 2012, and before October 1, 2029, is generally due by July 31 of the calendar year following the close of the plan year.
PCOR fees must be reported annually on Form 720, Quarterly Federal Excise Tax Return, for the second quarter of the calendar year. Plan sponsors that are subject to PCOR fees and no other types of excise taxes should file Form 720 only for the second quarter. For further details, please refer to: Form 720, Quarterly Federal Excise Tax Return (Rev. June 2024) and Instructions for Form 720 (Rev. June 2024) (irs.gov).
Generally, the PCOR fee is assessed based on the number of covered lives, which include enrolled employees, retirees, and COBRA participants and their enrolled spouses, domestic partners, and dependents. The fee for policy and plan years ending on or after October 1, 2022, but before October 1, 2023, is calculated based on the applicable rate of $3.00, multiplied by the average number of covered lives under the plan. For plan years ending on or after October 1, 2023, but before October 1, 2024, the fee is increased to the applicable rate of $3.22, multiplied by the average number of covered lives under the plan.
As a reminder, the insurer is responsible for filing and paying the fee for a fully insured plan. The employer plan sponsor is responsible for filing for a self-insured plan, including an HRA or point solution program that provides medical care. But stand-alone dental or vision plans and health FSAs that qualify as excepted benefits would not be subject to the PCOR fee.
According to the IRS, the fee is tax-deductible as a business expense. ERISA plan assets should not be used to pay the fee.
For further information regarding the PCOR fee and filing, please ask your broker or consultant for a copy of the NFP publication ACA: A Quick Reference Guide to the PCOR Fee.
The CAA, 2021 requires fully insured and self-insured group health plans to annually report certain information regarding prescription drug and healthcare spending to CMS. Reporting for the 2023 calendar year (termed the “reference year”) is due by June 1, 2024.
As in prior years, the data must be submitted to the Health Insurance Oversight System (HIOS) in files and formats specified by CMS. Detailed information regarding the reporting requirements, including the 2023 RxDC Instructions, FAQs, and a HIOS portal user guide, is available on the CMS website.
Employers should work closely with their carriers, TPAs, PBMs, and other vendors, as applicable, to ensure the required information is provided timely and accurately. In some cases, an employer that sponsors a self-insured plan may need to submit data directly to HIOS. In other situations, the carrier, TPA, or other service provider may agree to submit information on behalf of the plan. However, the employer will still need to provide certain data (e.g., the average monthly premium paid by employers and employees), and the employer should respond promptly to requests from service providers for requested information. Failure to timely respond to a request may result in the employer being required to submit the RxDC data on their own. Employers should also request written confirmation from their carrier, TPA, or service provider of the timely RxDC reporting submission.
Applicable large employers (ALEs) (employers with 50 or more full-time employees (FTEs), including full-time equivalent employees in the prior year) must comply with IRC Section 6056 reporting in early 2024. Specifically, ALEs must complete and distribute Form 1095-C to full-time employees by March 1, 2024. The form should include details regarding whether the employee was offered minimum value, affordable coverage during 2023.
The forms may be mailed, electronically delivered, or delivered by hand (although proof of delivery in some manner is recommended). Remember that there is a special rule for electronic delivery of Form 1095-C: the employee must affirmatively consent to delivery of the form. Consent to receive Form 1095-C in electronic format must be given in a manner that reasonably demonstrates that the recipient is able to access the statement in the electronic format in which it will be furnished. Alternatively, consent may be given in a paper document that is confirmed electronically.
Employers who sponsored a self-insured plan during 2023 must comply with Section 6055 reporting in 2024. Self-insured ALEs must complete Section III of Form 1095-C detailing which months the employee (and any applicable spouse and dependents) had coverage under the employer's plan. If the self-insured employer has fewer than 50 FTEs, it must complete and distribute a Form 1095-B with such information. Again, the forms must be delivered to employees by March 1, 2024.
An alternative method for distributing Form 1095-B is available to self-insured employers with fewer than 50 FTEs. These employers are permitted to post a clear and conspicuous notice on their website of the document's availability and the necessary contact information to request it. Any such request must be fulfilled within 30 days. This alternative is not available for Form 1095-C. Employers must also file these forms with the IRS by February 28, 2024, if filing by paper, and April 1, 2024, if filing electronically. The filing must include the transmittal Form 1094-C (if filing Forms 1095-C) or Form 1094-B (if filing Forms 1095-B). Importantly, beginning this year, employers that file 10 or more returns of any type (e.g., counting Forms 1095, W-2, and 1099 together) to the IRS in a calendar year must do so electronically absent a hardship waiver. Please see our article for more information on this change.
Additionally, employers with employees located in states with individual mandates may also have to comply with state reporting requirements and should be aware of the applicable deadlines. For further information on ACA and/or state reporting requirements, please ask your broker or consultant for a copy of the NFP publications ACA: Employer Mandate Reporting Requirements and State Individual Mandate Reporting Requirements.
2023 Form 1094-C »
2023 Form 1095-C »
2023 Form 1094-B »
2023 Form 1095-B »
2023 Instructions for Forms 1094-C and 1095-C »
2023 Instructions for Forms 1094-B and 1095-B »
NFP Corp. and its subsidiaries do not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.