Partnership for Employer-Sponsored Coverage Issues Public Comment on IRS Notice

WASHINGTON, Feb. 2 -- The Partnership for Employer-Sponsored Coverage has issued a public comment on the Internal Revenue Service notice entitled "Transition Relief Related to Health Coverage Reporting Required by Sections 6055 and 6056 for 2020". The comment was written on Jan. 28, 2021, and posted on Feb. 1, 2021:

The members are the American Hotel and Lodging Association, American Rental Association, Associated Builders and Contractors Inc., Associated General Contractors of America, Auto Car Association, Business Group on Health, Council of Insurance Agents and Brokers, ERISA Industry Committee, FMI - The Food Industry Association, HR Policy Association, National Association of Health Underwriters, National Association of Wholesaler-Distributors, National Restaurant Association, National Retail Federation, Retail Industry Leaders Association and Society for Human Resource Management.

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Madam Secretary, we commend you on your confirmation as our country's new Secretary of the Treasury. The Partnership for Employer-Sponsored Coverage welcomes the opportunity to provide policy recommendations for reforming the information-reporting requirements under sections 6055 and 6056 of the Internal Revenue Code, as requested in Notice 2020-76, Transition Relief Related to Health Coverage Reporting Required by Sections 6055 and 6056 for 2020. We are eager to work with you to reform, develop and implement policies to better enable employers to continue offering employment-based health coverage to the millions of American workers and their families enrolled in these plans.

The Partnership for Employer-Sponsored Coverage (P4ESC) is an advocacy alliance of employment-based organizations and trade associations representing businesses of all sizes and millions of Americans who rely on employer-sponsored health coverage every day. We are working to ensure that employer-sponsored coverage is strengthened and remains a viable, affordable option for decades to come.

Nearly ten years ago, work began on the implementing regulations under the Affordable Care Act's (ACA) employer shared responsibility, Code section 4980H, and information-reporting requirements, Code sections 6055 and 6056, by the Treasury Department, IRS, the Obama White House, in conjunction with the Health and Human Services (HHS) and Labor Departments, and numerous stakeholders including P4ESC under our predecessor organization the Employers for Flexibility in Health Care (E-Flex) Coalition. The E-Flex Coalition spent several years working collaboratively with Treasury, IRS and White House officials to develop flexible policy solutions under section 4980H. We also worked to support flexible policy solutions that would make sections 6055 and 6056 less of a compliance burden on employers, but, unfortunately to no avail.

P4ESC remains eager to work collaboratively with you and the new Administration to reassess and reform the information-reporting requirements under sections 6055 and 6056, especially during this public health and economic crisis. The ACA compliance requirements have always been complex and administratively burdensome on employers. With the current pandemic, the compliance complexities and tracking requirements are further exacerbated because employers are managing closures, decreased demand, work from home policies, furloughs, reduced hours, temporary layoffs and more. Employers of all sizes and their employees are continuing to face an unprecedented amount of uncertainty as a result of the COVID-19 pandemic and will do so for months and years to come.

As the pandemic rages on we strongly urge the new Administration to: 1) provide employers with COVID-related relief under the ACA requirements in the very near term, and 2) reform the information-reporting requirements to implement a consumer-friendly process for individuals, and a less burdensome and costly compliance process for employers, the federally facilitated and state-based Exchange systems and the Internal Revenue Service (IRS) alike. On November 19, 2020, we filed comments with the IRS (re: E.O. 13924) requesting COVID-related safe harbor relief under sections 4980H, 6055 and 6056. On December 22, 2020, we filed comments with HHS and Treasury (re: CMS-9914-P) about reforming the Exchange employment verification process which goes hand-in-hand with the sections 6055 and 6056. These letters and accompanying correspondence are attached.

The following is an outline of information-reporting requirement reform policies we would like implemented. These reform ideas were developed from employer compliance and operational feedback. We have conveyed these ideas to federal regulators and lawmakers on Capitol Hill over the last decade and know that the beginning of a new Administration is the perfect time to act.

* Revise the list of data requirements under sections 6055 and 6056 to be relevant and practical. The data lists were developed in 2009 during the legislative process and are stipulated in the ACA statute. For example, the statute included the requirement that employers collect and retain Social Security numbers indefinitely for all current and prior employees' spouses and dependents which creates a data security and identity theft risk for employers, employees, and their families. There has not been a comprehensive reevaluation of the relevance of the data being reported by employers. We are now in the eighth year of Exchange coverage and seventh year of the employer-shared responsibility and have a new Administration which supports preserving the ACA. The time is ripe to evaluate the necessity and practicality of data items reported annually against the cost and administrative compliance burdens on employers.

* Decouple information reporting for sections 6055 and 6056 from Form 1095-C. At the time that the IRS was designing the 1095-C form, self-insured employers requested one form be used to report overlapping information required under 6055 and 6056. We appreciated the original intent of streamlining the 1095-C form but now it is the reason why self-insured employers are not being afforded the same compliance relief provided to insurance carriers through elimination of the 1095-B form. As Notice 2020-76 states "[b]ecause the individual shared responsibility payment is zero in 2020, an individual does not need the information on Form 1095-B to compute his or her federal tax liability or file an income tax return with the IRS." The same rationale applies to individuals receiving coverage from a self-insured employer - a 1095-C form is not needed either.

* Enable applicable large employers (ALEs) to prospectively report to the IRS relevant data items about the type of coverage offered to their workforce of full-time employees prior to open enrollment season in the Exchanges. The most pertinent information about the type of coverage an ALE offers to its workforce, including a list of all Employer Identification Numbers (EINs), should be available for use by the federal facilitated and state-based Exchanges during open enrollment for employment verification and determination of an individual's eligibility for federally subsidized coverage. The existing data hub will house this information and no new IT system will need to be created. Prospective reporting will enable an ALE to comply with its employer-shared responsibility reporting requirement and provide a more consumer-friendly system to determine and individual's eligibility for Exchange coverage. We strongly believe sufficient flexibility exists to enable this change to be made administratively. We have supported legislation to make this change because of prior Administrations' reluctance to act administratively.

* Eliminate the requirement that self-insured employers send an individual 1095-C form to all enrolled employees. As noted above, there is no reason why an individual needs a 1095-B or 1095-C form since the individual shared responsibility payment is zero and there is no relevance of the form in filing an income tax return. The compliance burdens of consolidating data from multiple systems and costs of printing and mailing individual 1095-C forms is huge for employers. The same compliance relief provided to insurance carriers for 1095-B should be provided to self-insured employers.

* Require review of ALE-filed data before a 226-J penalty notification letter is sent. We have heard from numerous employers who have received a 226-J tax penalty letter despite complying with the 6055 and 6056 reporting requirements. It seems as though the practice has been: the IRS will issue a 226-J letter when notified of an individual who has received an Exchange tax credit but before data matching the information reported by the employer to the IRS. This sets up a process in which an employer must formally appeal a 226-J letter, within the strict 30-day appeals process no matter how long the letter takes to get to the employer in the mail, then spend time and resources to resend information to the IRS it has already filed. The current system, in which a 4980H "A" penalty is assessed rather than a thorough reconciliation of data on an individual's tax credit information and an employer's 6055 and 6056 reporting to assess a 4980H "B" penalty, assumes an employer is guilty and requires the employer to prove their innocence.

* Provide employers with 90 days, rather than 30 days, to appeal a 226-J tax penalty letter for any tax compliance year. A 226-J penalty letter is mailed to an employer listed on an individual's Exchange application when the IRS identifies that an individual received a premium tax credit but is believed to be a full-time employee and thus ineligible for a tax credit. When the IRS puts the 226-J letter in the mail it starts a 30-day appeals process, no matter how slow the mail is to be received. The 226-J letter could also be mailed to the address an individual puts on his or her application, which could be, for example, a store address and not the business headquarters where the letter should be mailed.

* Work directly with HHS and state-based Exchanges to verify employer information during open enrollment to determine individual premium tax credit eligibility. Premium tax credit eligibility is being assessed by HHS and state-based Exchanges based the information an individual puts on his or her application and is not cross referenced with real-time data that could be reported by an employer and housed in the data hub.

Healthcare.gov and state-based enrollment websites ask an enrollee if he or she received an affordable offer of coverage from an employer. Most enrollees do not understand that the term "affordable" is a legal definition that refers to the ALE's affordability text under 4980H. As noted above, data reported by an employer prior to open enrollment through a prospective reporting process would provide HHS and state-based Exchanges with better tools to verify employer information and tax credit eligibility.

Employers want the information-reporting requirements under sections 6055 and 6056 and the Exchange eligibility verification process to run efficiently and effectively so their employees are not subject to the costly repayment of premium tax credits and the business is not subject to possible violations under the employer shared responsibility. A comprehensive reevaluation of the compliance requirements and information-sharing under the ACA is long overdue. P4ESC stands very ready and able to help the new Administration revise the processes.

We are very eager to discuss the above reforms of sections 6055 and 6056 and the urgent need to provide COVID-related safe harbor relief to employers with Treasury, IRS and White House officials. We welcome the opportunity to schedule a virtual meeting with the appropriate professionals. Please contact our executive director, Christine Pollack, at [email protected] to schedule a meeting.

View attachment at: https://www.regulations.gov/contentStreamer?documentId=IRS-2020-0037-0140&attachmentNumber=1&contentType=pdf

Sincerely,

American Hotel & Lodging Association

American Rental Association

Associated Builders and Contractors, Inc.

Associated General Contractors of America

Auto Car Association

Business Group on Health

The Council of Insurance Agents & Brokers

The ERISA Industry Committee (ERIC)

FMI - The Food Industry Association

HR Policy Association

National Association of Health Underwriters

National Association of Wholesaler-Distributors

National Restaurant Association

National Retail Federation

Retail Industry Leaders Association

Society for Human Resource Management

Attachments:

P4ESC letter, re: CMS-9914-P, December 22, 2020

P4ESC letter, re: E.O. 13924, November 19, 2020

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The notice can be viewed at: https://www.regulations.gov/document?D=IRS-2020-0037-0020

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