Health Underwriters Suggest Changes to Proposed E-Filing Regs

September 21, 2021

The Honorable Janet L. Yellen
Secretary, Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

The Honorable Charles Retti
Commissioner, Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

RE: REG-102951-16

Dear Secretary Yellen and Commissioner Rettig:

I am writing on behalf of the National Association of Health Underwriters (NAHU), a professional association representing over 100,000 licensed health insurance agents, brokers, general agents, consultants and employee benefit specialists. We are pleased to have the opportunity to comment on the proposed rule titled “Electronic-Filing Requirements for Specified Returns and Other Documents,” published in the Federal Register on July 23, 2021.

The members of NAHU work daily to help millions of individuals and employers of all sizes purchase, administer and utilize health insurance coverage. Most our members specialize in group health insurance coverage and often assist their group clients with related state and federal reporting requirements, including IRC §§6055 and 6056 information returns. Therefore, we offer these comments on the proposed changes to the electronic threshold based our membership's expertise working on group health plan administrative tasks with small and large employer group health plan sponsors.

The proposed regulations would amend §301.6011-2(c)(1)(i), which currently provides that no one is required to electronically file an information return covered under §301.6011-2(b) unless the entity is required to file 250 or more returns during the calendar year. Under the new proposed rule, the threshold would shift from 250 to 100 for returns required to be filed during calendar year 2022, and from 100 to 10 for returns required to be filed during calendar years after 2022. Additionally, the proposed regulations would remove the non-aggregation rule from §301.6011-2(c)(1)(iii) so that all information returns filed by an entity over the course of a calendar year would count toward the electronic-filing threshold. Finally, the proposed rules specify that if an entity is required to file original information returns electronically, it must file any corresponding corrected information returns electronically. NAHU members generally support the proposed changes to the information return electronic-filing requirements. However, our members believe that their clients, particularly those with a smaller number of employees, would benefit from two distinct modifications.

The first modification our association feels necessary is a one-year delay in the effective date of the proposed changes so that the electronic-filing threshold would decrease to an aggregate total of 100 returns during calendar year 2023, and from 100 to 10 in subsequent calendar years. NAHU members feel that smaller employers will be able to weather the changes the proposed rule will bring but note that it will take at least a month or two for the Internal Revenue Service to finalize any regulatory changes in this area, and we are already almost in the fourth quarter of 2021. Just as the IRS needs the time granted by the one-year step-down approach proposed in the regulation to ensure it has sufficient resources to handle and process the increased volume of electronically filed information returns, employers that are currently using paper-filing options will need time to adjust their processes. Giving at least one year of adjustment time to all parties would be the fairest approach and reduce the errors and administrative burdens associated with any quick compliance turnaround.

Additionally, to reduce the administrative and cost burden the change to the electronic-filing threshold will pose for smaller employers, NAHU members request that the IRS develop a free electronic-filing method for each type of return that entities that file 50 or fewer returns may use instead of having to hire an electronic-filing vendor. States that require employers to electronically file returns to report on employee compliance with state individual health insurance mandate requirements offer this type of service to smaller employers with great success. Most use a simple.pdf form-filler method that is easy for both the business and the state to use and process.

The IRS notes that, in 2018, approximately 98.5 percent of information returns were filed electronically. In our membership's experience, those entities that do not already use an electronic-filing option are those whose volume of returns filed is relatively low, so paper filing is cheaper and easier for them. By providing a free resource to these smaller employers, as the states do, the IRS and Treasury Departments will increase the chance smaller employers will comply with these changes on a timely and error-free basis. It will also eliminate a new administrative cost burden for small-business owners.

Thank you for the opportunity to provide input on this proposed final rule to implement to expand the federal electronic-filing threshold. If you have any questions about our comments or need more information, please do not hesitate to contact me at (202) 595-0639 or jtrautwein@nahu.org.

Sincerely,

Janet Stokes Trautwein
Executive Vice President and CEO
National Association of Health Underwriters
Washington, DC