Furnishing Forms 1095-C to Employees Electronically

By Brian Gilmore | Published December 5, 2023

Question: Can employers use electronic forms of distribution (e.g., via email or online payroll, benefits administration system, or website posting) to satisfy the ACA reporting requirement for ALEs to furnish Forms 1095-C to full-time employees?

Short Answer: ALEs must furnish the Forms 1095-C to employees no later than March 1 (March 2 in a non-leap year). To furnish the forms electronically, employers must obtain the employee’s affirmative consent specifically relating to receiving the Form 1095-C electronically. This approach is more difficult to satisfy than the general ERISA electronic disclosure rules for plan materials.

ACA Reporting: Overview

The ACA requires Applicable Large Employers (ALEs) to report whether they offered minimum essential coverage (MEC) that was affordable and provided minimum value to full-time employees. Employers of any size with self-insured plans also report months of coverage for all enrolled individuals. Regardless of funding arrangement, ACA reporting for ALEs is handled via IRS Forms 1094-C and 1095-C. The IRS receives both the Forms 1094-C and 1095-C, but employers furnish only the Forms 1095-C to employees.

For more details:

The Default Form 1095-C Furnishing Method: Standard Paper Mailing (or Hand Delivery)

The general rule is that ALEs must furnish the Form 1095-C to employees on paper by mail or hand delivery. If mailed, the form must be sent to the employee’s last known permanent address (or to the employee’s temporary address). The form is considered timely if properly addressed and mailed on or before the due date (March 1 in 2024 because it is a leap year, March 2 in other non-leap years).

Furnishing the Form 1095-C Electronically: Specific Affirmative Consent Required

ALEs must obtain the employee’s affirmative consent to furnish the Form 1095-C electronically. The consent must relate specifically to receiving the Form 1095-C electronically.

The Form 1095-C electronic furnishing standard provides that:

A generalized electronic distribution authorization completed by the employee is not sufficient.
The employee authorization must specifically identify electronic distribution of the Form 1095-C.
Employees may consent on paper or electronically (e.g., by email).
The electronic consent must demonstrate the employee can access the statement electronically in the manner in which it will be furnished.
The IRS prescribes notice and content requirements associated with the employee’s consent.
If the consent is on paper, the employee must also confirm the consent electronically.
Employees can withdraw their consent to receive the Form 1095-C electronically at any point.

The IRS’s somewhat dated position is that this specific affirmative consent requirement “ensures that statements are furnished electronically only to individuals who are able to access them.” Its justification for this position is that the Forms 1095-C “contain individualized information” essential to the accurate preparation of their individual tax return regarding a claim for the premium tax credit.

Form 1095-C Electronic Disclosure: Content Requirements

Employers seeking employees’ authorization to furnish Forms 1095-C electronically must provide a clear and conspicuous disclosure statement to each employee that contains the following content:

Paper Statement: The ability to receive the Form 1095-C on paper if the employee does not consent to receive it electronically.
Scope and Duration of Consent: To which forms the consent will apply and for how long (e.g., ongoing or just this reporting season).
Post-Consent Request for a Paper Statement: The procedure for obtaining a paper copy of the Form 1095-C (and whether that request will be treated as a withdrawal of consent for electronic delivery going forward).
Withdrawal of Consent: The ability to withdraw consent electronically or on paper, the contact information for making such withdrawal, and when such withdrawal will be effective.
Notice of Termination: Conditions under which the employer will cease furnishing statements electronically (e.g., termination of employment).
Updating Information: Procedures for updating the information needed to contact the employee.
Hardware and Software Requirements: A description of the hardware and software required to access, print, and retain the Form 1095-C.

Posting the Form 1095-C on a Website

Employers may post the Form 1095-C on a website as long as the employer notifies the employee where it is posted with instructions on how to access and print it. The notice must include, in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” If the notice is provided by email, that statement must be in the subject line.

Employers must ensure the Forms 1095-C remain posted on the website through the first business day on or after October 15 of the year following the calendar year to which Form 1095-C relates.

Withdrawal of Electronic Consent

Employers must provide the Form 1095-C by paper if an employee withdraws their electronic consent. Paper Forms 1095-C provided after the due date are still considered timely if furnished within 30 days after the date the employer receives the withdrawal of consent.

Why It Matters: ACA Reporting Penalties

The general potential ACA reporting penalties for late/incorrect Forms 1095-C required to be furnished in 2024 is $310 per form. The 2024 maximum penalty for a calendar year will not exceed $3,783,000 for late/incorrect furnishing. The employer is subject to a penalty of at least $630 per form with no maximum penalty if the IRS finds that it intentionally disregarded furnishing Forms 1095-C in 2024.

The IRS reduces that general penalty if the late/corrected forms are furnished in certain time periods:

30-Day Correction: If corrected within 30 days of the due date, the per-return penalty is $60 (capped at $630,500 in 2024).
August 1 Correction: If corrected by August 1, the per-return penalty is $120 (capped at $1,891,500 in 2024).

There is also "reasonable cause" relief available that could potentially reduce or eliminate these ACA reporting penalties if the employer can show no willful neglect.

ERISA Electronic Disclosure Safe Harbor: Not Applicable for ACA Reporting

Employers are often more familiar with the general safe harbor for electronic disclosure of ERISA-related materials. Unlike the IRS standard for Forms 1095-C, the DOL safe harbor provisions both allow an opt-out electronic disclosure approach for certain employees and a generalized consent structure for those who have to opt-in to meet the safe harbor.

For more details:

Reminder: Electronic Filing Required for ACA Reporting Starting in 2024

There are two basic components of ACA reporting for ALEs:

Furnishing the Forms 1095-C to employees; and
Filing the Forms 1094-C and 1095-C with the IRS.

While this post addresses the former, employers should keep in mind that the electronic filing rules have changed for the 2023 Forms 1094-C and 1095-C filed at the start of 2024.

Summary

Employers are often caught by surprise that they cannot follow the same electronic disclosure approach with ACA reporting as applies to ERISA disclosures. This can cause administrative headaches ensuring procedures are in place to mail (or hand deliver) paper copies of the Forms 1095-C to employees, or to establish an electronic consent process that meets the rigorous IRS standards described above.

Employers wishing to furnish ACA reporting forms electronically will need to obtain affirmative consent from each employee that specifically addresses the Form 1095-C and meets all the notice and content requirements specified by the IRS.

Relevant Cites: IRS Form 1094-C and 1095-C Instructions: