Understanding the ACA Requirement for Reporting Social Security Numbers on IRS Form 1095-B/C

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One of the key administrative aspects of the Affordable Care Act (ACA) that HR professionals must navigate is the requirement to report Social Security Numbers (SSNs) for all covered dependents on IRS Forms 1095-B and 1095-C. This requirement is crucial for compliance with federal regulations and helps ensure the accuracy of the information provided to both the IRS and individuals about their health coverage.

Form 1095-B and 1095-C: What’s the Difference?

• Form 1095-B is issued by insurance providers and details the type of health coverage an individual has, including who is covered and for how long.
• Form 1095-C is issued by employers that have 50 or more full-time employees (Applicable Large Employers, ALEs) and provides information about the health insurance offered to employees, including whether the coverage meets the minimum value standard and is affordable.

Why Report SSNs? The primary reason for collecting and reporting SSNs is to verify the identity of individuals and ensure that they are properly offered health insurance as required under the ACA. The IRS uses these SSNs to cross-reference health coverage data with individuals’ tax obligations, helping to enforce the individual mandate of the ACA, which was designed to ensure that everyone has health insurance or pays a penalty (although the penalty was reduced to $0 starting in 2019, the requirement to report coverage remains in place).

Penalties for Inaccurate SSN Reporting The IRS enforces penalties under Sections 6721 and 6722 of the Internal Revenue Code for failing to provide correct information returns or furnish accurate payee statements. These penalties range from $60 to $630 per incorrect return. The severity of the penalty depends on whether the mistake was intentional or unintentional and the delay in correcting the information. Wrong SSNs is incorrect information, and for HR departments, this underscores the importance of double-checking SSN entries for accuracy before submission.

Impact on Employees Incorrect SSN reporting can adversely affect an employee’s eligibility for the Premium Tax Credit (PTC) and lead to complications during tax filing, potentially resulting in tax return processing delays or IRS audits. This aspect of SSN reporting stresses the necessity for HR to get it right, not only to comply with IRS regulations but also to safeguard employees from possible financial scrutiny.

Challenges in Collecting SSNs Collecting SSNs can be challenging due to privacy concerns and the potential for data breaches. It is imperative that employers handle this sensitive information with care, ensuring robust data protection measures are in place. When an SSN is not available, employers must make reasonable efforts to acquire it, which typically involves making an initial request followed by two subsequent annual requests if the SSN is not initially provided.

Alternative Reporting: Date of Birth In instances where an SSN cannot be obtained despite diligent efforts, the IRS allows the reporting of a dependent’s Date of Birth (DOB) as an alternative. However, employers must demonstrate a good faith effort to obtain the SSN, which includes making multiple requests to employees. Documentation of these efforts should be maintained in case IRS verification is required.

If the SSN is later acquired, employers are expected to update the information to ensure records are current and accurately reflect the dependent’s information, potentially rectifying any issues related to earlier submissions.

Best Practices for HR Professionals

• Educate Employees: Clearly communicate the importance of providing accurate information, including SSNs for dependents, for health coverage reporting. Assure them of the security measures in place to protect their data.
• Implement Secure Processes: Use secure methods to collect and store SSNs to protect against data breaches. Regularly review these security practices and improve them as needed.
• Stay Informed on Compliance: The regulations surrounding ACA reporting can evolve, so it’s important to stay informed about any changes to reporting requirements or procedures.
• Documentation and Follow-Up: Keep meticulous records of all requests for SSNs and responses received. This documentation will be useful in demonstrating compliance efforts should the IRS have questions.

Conclusion Reporting SSNs on Forms 1095-B/C is a key ACA requirement that helps the IRS ensure individuals have or have been offered the required health coverage. For HR departments, ensuring compliance involves not only managing data collection but also safeguarding sensitive information and staying abreast of regulatory changes. As complex as ACA reporting can be, thorough preparation and proactive employee communication can streamline the process, ensuring both compliance and data security.

By adhering to these guidelines, HR professionals can effectively manage the complexities of ACA compliance while maintaining the trust and confidence of their employees regarding the sensitive data handling required.

For information about BAS’ ACA data collection and reporting services, contact your account manager or solutions@basusa.com.