March 04, 2022

Commonsense Reporting Act brings clarity to ACA’s complex tax code

Streamlined submission process of health coverage information would benefit employers, employees, health plans, and government agencies.
Health Benefits Forms
When the Affordable Care Act was signed into law in 2010, it required employers to report health coverage information to the Internal Revenue Service and provide statements to covered individuals. Yet the sections pertaining to tax credit eligibility and employer information reporting (6055 and 6056) are complex, and financial penalties can be high for employers who do not comply. 

“Restaurants face annual compliance burdens with unintended tax implications, and we appreciate bipartisan efforts in Congress to help employers and employees,” said Association director of Healthcare and Tax Policy Aaron Frazier. “Congress must advance a simplified, streamlined solution under the Commonsense Reporting Act that modernizes employer reporting.”

Recently introduced in the Senate by Sens. Mark Warner (D-VA) and Rob Portman (R-OH), the Commonsense Reporting Act (S. 3673), would make the health coverage reporting process more efficient by creating a “prospective reporting option.” 

Currently, employers report health information to the IRS during their year-end tax filing season. Under the Commonsense Reporting Act, employers could voluntarily report coverage in advance, prior to the regular health insurance Exchange open enrollment season.  

As a result:
  • Individuals will get more consumer-focused data when they enroll for coverage.
  • Employers will get some compliance relief as the legislation would mitigate possible threats of tax penalties and avoid the accounting and legal costs incurred to appeal a tax penalty notice.
  • Health Exchanges and the IRS will have an additional means to verify tax credit and subsidy eligibility.

The legislation also protects Social Security numbers and modernizes the flow of information to consumers.

As a member of the Partnership for Employer-Sponsored Coverage, the Association recently addressed the complexities in the ACA tax code requirements and endorsed the legislation in a letter to Warner and Portman.

A companion bill (H.R. 5318) was introduced in the House in Sept. 2021.

The Association is working with members of Congress in both chambers to pass the Consumer Reporting Act.