When the ACA was drafted, the IRS created a reporting mechanism for employers to report on everyone with health insurance. No employer stakeholders were included in the drafting of this section of the ACA, It was a one-size-fits-all model, and of course, employers are not all one size. Some employers are seasonal, retail, shift workers, and so on.
A coalition spent about three years working with the Treasury and IRS to make adjustments that were within their purview to change, however, we hit a wall because much of the language was in statute and required congressional approval for further changes to occur.
A new coalition spent the next 10 years seeking a legislative remedy to provide employers with further relief. The House Ways and Means Committee hosted a hearing where the IRS Commissioner bragged that they solved about 80% of the penalty demand letters. These letters to employers, large and small, caused panic among many businesses because the penalties could range in the millions of dollars.
Compliance has become an expensive aspect of providing health insurance to employees. CPAs should do this for their clients, but CPAs typically won’t and it falls to TPAs or agents to facilitate the reporting on behalf of their clients.
Many people told me to give up the fight for a reporting bill, but I refused. A voluntary commonsense reporting bill still made sense to pursue because of the reduced burden, particularly for small employers. It provides guardrails for how long the IRS has to send a penalty demand letter to an employer (audits are running years behind) removes the requirement to report the social security numbers of dependents, and allows employers to provide employees with electronic notices. Finally, it simplifies the eligibility verification process for the health care premium tax credit and cost-sharing subsidy - a good government provision.
Congressmen, Adiran Smith, NE, and Mike Thompson, CA are credited for being stalwart supporters through the many drafts and changes over the years which led to passage in the Ways and Means and House of Representatives in 2023 and 2024 respectively. Senators John Thune, SD, and Ron Wyden, OR shepherded the bill via a hotline in the Senate, along with the Paperwork Reduction Act, a strong companion bill to the Commonsense Reporting Act.
Schoolhouse Rock! once did a well-known segment called, “I’m just a bill” to explain how a bill becomes a law. Getting a bill across the finish line can be more complicated and take more than one congressional two-year session to achieve. This particular bill was not a bumper sticker bill and was somewhat in the weeds, so it took time to ripen and gain momentum. I am proud to see this bill finally pass the Senate and await signature by President Biden.
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