What Employers Need to Know about ACA Reporting

The Affordable Care Act (“ACA”) has introduced several reporting requirements for employers and insurance providers, all aimed at ensuring compliance with health coverage mandates. As an employer, understanding which forms you need to file can be challenging but essential for avoiding penalties. Whether you are an Applicable Large Employer (“ALE”) or a small employer with a self-funded health plan, it’s crucial to know your reporting obligations.

In this blog, we’ll cover the key differences between Forms 1094-C, 1095-C, 1094-B, and 1095-B. We will also identify which ones apply to your organization, what you need to file, and important deadlines to keep in mind.

What is ACA reporting?

ACA reporting helps the IRS verify whether employers are offering the required health coverage under the Employer Shared Responsibility Provisions (“ESRP”) and whether individuals have health coverage in compliance with the individual mandate. This is done via the submission of specific forms based on the employer’s size and the type of health coverage they provide.

Forms 1094-C and 1095-C

If your organization qualifies as an ALE (50 or more full-time employees or equivalents), you are required to file Forms 1094-C and 1095-C. These forms report whether you offered affordable, minimum essential coverage to your full-time employees.

• 1094-C is the transmittal form sent to the IRS, summarizing the 1095-C forms.
• 1095-C is sent to each full-time employee, detailing the offer of health coverage made to them, their spouse, and dependents.

These forms help the IRS determine if the employer is meeting its ACA obligations and if employees are eligible for subsidies in the Marketplace.

Forms 1094-B and 1095-B

Small employers with fewer than 50 full-time employees who offer self-funded health plans are required to file Forms 1094-B and 1095-B. These forms report the actual health coverage provided to individuals.

• 1094-B is the transmittal form sent to the IRS, summarizing the 1095-B forms.
• 1095-B is sent to individuals covered under the health plan to verify they had minimum essential coverage (“MEC”).

In most cases, insurance carriers will file these forms on behalf of employers offering fully insured plans.

ACA reporting deadlines

Employers must provide Forms 1095-C or 1095-B to employees by January 31. The forms must be submitted to the IRS by February 28 (if filing by paper) or March 31 (if filing electronically). Timely filing is critical, as non-compliance can result in substantial penalties.

Common pitfalls to avoid

ACA reporting can be complex, and many employers make common mistakes that can lead to costly penalties. It’s important to understand the errors that can occur, how to avoid them, and what the consequences might be if you fail to meet your reporting obligations.

Failure to file forms on time

The IRS imposes significant penalties for failing to file ACA forms by the required deadlines. Under IRC Section 6721, penalties are assessed for each form that is not filed on time with the IRS. Similarly, under IRC Section 6722, penalties apply for failing to furnish the required forms (1095-C or 1095-B) to employees or covered individuals by the specified due dates. Penalties for failing to meet these obligations can be steep:

• Up to $310 per form (as of 2024) for failing to file with the IRS or provide the form to employees.
• Penalties double for forms that are both not filed with the IRS and not furnished to employees, reaching $620 per affected individual (as of 2024).

Incorrect or incomplete information on forms

Another common pitfall is submitting forms with errors or missing information. This includes:

• Incorrect Social Security Numbers (“SSNs”) or Taxpayer Identification Numbers (“TINs”).
• Mistakes in employer identification numbers (“EINs”).
• Incorrect data regarding the offer of coverage or months of coverage.

Under IRC Sections 6721 and 6722, incorrect or incomplete forms are subject to the same penalties as late filings—up to $310 per form (as of 2024). Employers should verify that all information is accurate before submission to avoid these penalties.

Failure to file corrected forms

If errors are identified after forms are filed, employers must submit corrected forms as soon as possible to avoid penalties. If corrections are not made, the employer may be penalized for each form with inaccurate information. Penalties can be reduced if the error is corrected within 30 days of the original due date under IRC Section 6721(c). For corrections made after the 30-day window but before August 1, reduced penalties of $60 per form may apply (as of 2024).

Filing paper forms when required to file electronically

Employers filing more than 250 forms must file electronically. Failing to meet this requirement is considered a violation under IRC Section 6011(e). If an employer submits paper forms when electronic filing is required, penalties can still apply even if the forms are filed on time.

Intentional disregard of filing requirements

The IRS imposes much harsher penalties for intentional disregard of filing or furnishing requirements. Under IRC Section 6721(e), if the IRS determines that an employer willfully disregarded the requirement to file forms with the IRS or provide forms to employees, the penalties are significantly higher:

• Penalties start at $620 per form (as of 2024), and there is no cap on total penalties.
• The IRS is more likely to assess these penalties if it believes the employer made no good-faith effort to comply with reporting requirements.

Not knowing which forms to file

Employers must understand whether they are required to file 1094-C/1095-C (Applicable Large Employers) or 1094-B/1095-B (small employers with self-funded plans or insurance providers). Filing the wrong forms can result in penalties for failure to file, even if the employer attempted to comply.

For example:

• ALEs (employers with 50 or more full-time employees or equivalents) must file Forms 1094-C and 1095-C, even if they do not offer health coverage.
• Small employers (under 50 employees) with self-funded health plans must file Forms 1094-B and 1095-B. If the plan is fully insured, the insurance carrier handles the filing of these forms.

Understanding which forms apply to your organization is essential for avoiding mistakes in ACA reporting.

Not keeping proper records

Employers are required to keep copies of all submitted forms and supporting documentation for at least three years after the filing date. Failing to maintain these records could complicate an audit or compliance review and may result in penalties if the employer cannot prove timely and accurate filing.

Conclusion

ACA reporting requires attention to detail and timely compliance to avoid penalties. Familiarize yourself with the appropriate filing requirements, ensure accuracy in the forms, and file on time to stay in compliance with IRS regulations. If you’re unsure of your reporting obligations or need assistance, consult with a compliance expert or legal advisor to help you navigate the process.