The ACA mandates that certain employers report information about the health coverage they offer to their employees. This reporting requirement helps the IRS ensure that employers meet the obligations of the ACA and enables the IRS to administer subsidies and penalties.
How Employers Can Comply with the Affordable Care Act
Who Must Comply
- Applicable Large Employers (ALEs): ALEs are employers with 50 or more full-time employees, including full-time equivalent employees, in the previous year.
- Self-Insured Employers: Even if not an ALE, employers that provide self-insured health plans must comply with certain reporting requirements.
Key Forms
- Form 1094-C & 1095-C: Used by ALEs to report information about the offers of health coverage to full-time employees.
- Form 1094-B & 1095-B: Used by insurers or self-insured employers to report coverage information.
Deadlines
- Form 1095-C/B to Employees: Forms must be furnished to employees by Tuesday, March 3rd, 2026.
- Forms 1094-C/B & 1095-C/B to IRS: Paper filings are due by Monday, March 2nd, 2026; electronic filings are due by Tuesday, March 31st, 2026.
Potential Penalties
Failure to comply with ACA reporting requirements can result in substantial penalties, including fines for failing to file on time or providing incorrect information.
- §4980H(a) "A" Penalty: $2,900 per full‑time employee (annualized) if MEC is not offered to at least 95 % of full‑timers.
- §4980H(b) "B" Penalty: $4,350 per employee who receives subsidized exchange coverage because the ALE's offer was unaffordable or failed Minimum Value.
- Information‑return penalties: $60–$340 per form, up to $680 for intentional disregard, plus separate penalties for failing to furnish statements.
Best‑Practice Checklist
- Map your footprint: identify every EIN and determine ALE status; remember state‑level reporting in CA, DC, MA, NJ & RI.
- Validate data early: run IRS TIN Match and scrub for missing birth dates or invalid ZIP codes before import.
- Affordability testing: use the current safe‑harbor rate (8.39 % for plan years beginning in 2025; increasing to 9.02 % for 2026).
- E‑file readiness: aggregate all W‑2, 1099, 1095 and other returns to confirm you're over the 10-return e‑file threshold; request a hardship waiver on Form 8508 if needed.
- Publish the on‑request notice: place it on a public‑facing webpage by the furnishing deadline and keep it up through October 15.
- Document everything: keep copies of filed XML, IRS acknowledgements, and proof of furnishing for at least four years in case of a Letter 226‑J.
Import
E-file
Done
How Can Employers Determine Affordability?
Employers can determine the affordability of a health care plan under the Affordable Care Act (ACA) by comparing the cost of the employee's required contribution for the lowest-cost, self-only coverage to the employee's household income. There are three main IRS-approved methods:
- W-2 Wages Method: This method can be used when an employer wants to base affordability on the actual wages paid to the employee. It's suitable for employees with stable hours and wages, as it considers the wages reported in Box 1 of the W-2 form for the employee.
- Rate of Pay Method: Employers may use this method for hourly employees, where wages may vary. By multiplying the hourly wage by 130 hours per month, employers can estimate the monthly wages. This approach may be preferred for employers with a significant number of hourly or part-time employees.
- Federal Poverty Line Method: This approach can be useful when the employer does not have information about the employee's household income. By comparing the cost of self-only coverage to the federal poverty line for a single individual, employers can use a fixed threshold.
Which States Require Additional Submission?
These states have their own reporting requirements that may mirror or add to federal ACA requirements.
- California
- Massachusetts
- New Jersey
- Rhode Island
- Vermont
- Washington, D.C.
How to Calculate Full-Time Equivalents for ACA Reporting
Calculating full-time equivalents (FTEs) is a crucial aspect of ACA reporting for employers. Under the Affordable Care Act, a full-time employee is defined as working at least 30 hours per week or 130 hours per month. Part-time employees' hours are also considered in calculating FTEs, by adding the total part-time hours and dividing by 30. The total number of full-time employees and FTEs is used to determine if an employer is considered an Applicable Large Employer (ALE) and thereby subject to certain ACA requirements.
What Information Is Required to Fill Out the Affordable Care Act Forms?
- Employer Information: Including the name, address, Employer Identification Number (EIN), and contact details.
- Employee Information: Such as names, Social Security numbers, addresses, and dates of birth.
- Health Coverage Details: Information about the health insurance offered, including who was covered, the months of coverage, and the employee share of the lowest-cost monthly premium for self-only minimum essential coverage.
- Full-Time Employee Status: Data on employees' full-time status, including the number of full-time employees and full-time equivalents, and related calculations.
- Offers of Coverage: Details on the type of coverage offered to full-time employees and their dependents, using specific IRS codes to denote the type and affordability of the coverage.
- Safe Harbor Information: If applicable, information about the affordability safe harbors used.
- Other Information: Various forms may require additional specific details related to the employer's health coverage, plan start month, and other pertinent data.
What Are the Consequences of Noncompliance with ACA Reporting?
Failure to File or Late Filing: Employers who fail to file the required ACA forms by the deadline may be subject to penalties. The penalty can vary depending on the length of the delay and can increase over time.
Incorrect or Incomplete Information: If the forms are filed with incorrect or incomplete information, penalties may apply. Corrections must be made as soon as possible to avoid or reduce penalties.
Failure to Provide Forms to Employees: Employers must provide copies of certain ACA forms to their employees. Failure to do so may result in additional penalties.
Failure to Offer Required Coverage: Applicable Large Employers (ALEs) must offer health coverage that meets certain minimum standards to full-time employees and their dependents. Failure to offer such coverage, or offering coverage that does not meet the affordability or minimum value standards, may result in significant penalties known as the Employer Shared Responsibility Payments.
State-Specific Penalties: Some states have their own health coverage reporting requirements, and failure to comply with these state-specific regulations may result in additional fines and penalties.
Why Is ACA Reporting Important?
Legal Obligation: ACA reporting compliance is a legal requirement for certain employers under the Affordable Care Act. Failure to comply can result in penalties and legal actions.
Employee Information: ACA reporting provides essential information to employees about their health coverage, helping them complete their personal tax returns and understand their healthcare options.
IRS Verification: The information reported to the IRS helps verify whether employers and employees are meeting their obligations under the ACA, including whether employers are offering qualifying health coverage, and whether employees are receiving the coverage to which they are entitled.
Government Oversight: ACA reporting allows government agencies to oversee the healthcare system, ensuring that it functions as intended, and provides the necessary coverage and protections to the population.
Contribution to Public Health Goals: Compliance with ACA reporting helps support broader public health goals by encouraging employer-provided health coverage, facilitating access to care, and fostering a healthier population.
