ACA Reporting 101: Primer Information for Employers

The Affordable Care Act (ACA), signed into law over a decade ago, has fundamentally transformed the healthcare landscape in the United States. While its primary goal was to expand access to affordable health insurance, it also introduced a complex web of regulations that businesses must navigate. For HR professionals, this translates into a yearly dance that can be both intricate and high-stakes. Let's delve deeper into why ACA reporting is so crucial and how HR can help more successfully weave through its complexities.

ACA Reporting: What's the Big Deal?

In essence, ACA reporting is the mechanism through which employers demonstrate to the IRS that they are meeting their obligations under the law. It involves collecting and submitting detailed information about the health insurance coverage offered to your employees. This information is used by the IRS to*:

• Verify Regulatory Requirements are Met: The IRS uses ACA reporting data to determine whether Applicable Large Employers (ALEs) – those with 50 or more full-time equivalent employees – are offering affordable, minimum-value health coverage to their full-time employees and their dependents.
• Administer Premium Tax Credits and Cost-Sharing Reductions: The information reported on ACA forms helps the IRS determine eligibility for premium tax credits and cost-sharing reductions, which help individuals and families afford health insurance coverage purchased through the Health Insurance Marketplaces.
• Enforce the Individual Mandate: Although the individual mandate penalty has been reduced to zero, ACA reporting still plays a role in encouraging individuals to obtain health insurance coverage.

The Key Players

The heart of ACA reporting lies in two key forms: 1094 and 1095.

• Form 1094-C: This is a transmittal form used by ALEs to summarize the information on the 1095-C forms filed for the year. It provides an overview of your company's health insurance offerings and the number of employees offered coverage.
• Form 1095-C: This is the individual employee statement that ALEs must furnish to each full-time employee and the IRS. It details the type of coverage offered to the employee, the cost of that coverage, and the months during which the employee was eligible for coverage.
• Form 1095-B: While not directly filed by employers, it's important to understand that health insurance providers, self-insured employers, and certain other entities are responsible for filing Form 1095-B with the IRS. This form provides information about individuals who were covered under a health insurance plan.

Why is ACA Reporting So Complex?

• Regulatory Complexity: The ACA regulations are intricate and subject to change, making it difficult to stay on top of the latest requirements.
• Data Management: Tracking employee eligibility, hours worked, and offered coverage requires meticulous data management. Even small errors can trigger issues.
• Form 1095 Headaches: Generating and distributing accurate 1095-C forms to employees and the IRS is a major logistical task, especially for larger companies.
• Time Constraints: The ACA reporting deadlines are strict, and HR teams often have to juggle multiple responsibilities while preparing the required forms.
• Communication Hurdles: Ensuring that employees understand their healthcare options and the information they need to provide to HR can be a challenge.
• Company Evolution: Factors like high turnover or rapid company growth can significantly impact ACA requirements. For example, if your company has recently grown and crossed the 50 full-time employee threshold, you may now be required to offer ACA-compliant health insurance and fulfill all associated reporting requirements.
• Political Landscape: The ACA has been subject to ongoing political debate and legislative changes, which can create uncertainty and complexity for employers.

Who Needs to File?

The ACA reporting requirements primarily apply to ALEs, but there are some exceptions and nuances to be aware of*:

• ALEs: If your company has 50 or more full-time equivalent employees, you are generally required to file Forms 1094-C and 1095-C with the IRS and furnish Form 1095-C to your employees.
• Self-Insured Employers: Even if you are not an ALE, if you offer a self-insured health plan, you may need to file Form 1095-B with the IRS and furnish it to covered individuals.
• Small Employers: Employers with fewer than 50 full-time equivalent employees are generally not required to file ACA forms, but they may still need to provide information to their employees about the coverage they offer.

Keep in mind that if your company has recently grown, you may now be required to offer ACA. 

When is ACA Reporting Due?

The deadlines for ACA reporting are typically in the first quarter of the year following the calendar year for which you are reporting.*

• Furnish to Employees: Employers must furnish Form 1095-C to their full-time employees by March 2, 2026 (the permanently extended deadline of 30 days after January 31, or the first business day thereafter). 
• File with the IRS: The deadline for filing Forms 1094-C and 1095-C with the IRS is typically February 28th if filing paper forms, or March 31st if filing electronically.

Important Note About State Mandates

In addition to federal ACA reporting requirements, several states have implemented their own individual mandates, which may have different deadlines and require additional reporting. If your company has employees in any of the following states, you'll need to comply with their specific requirements*:

• California:
  • Individual Delivery (Form 1095): January 31st
  • State Filing (Form 1094 and 1095 to the CA Franchise Tax Board): May 31st
• District of Columbia:
  • Individual Delivery (Form 1095): March 2nd (follows IRS furnishment deadline)
  • State Filing (Form 1095 to The District's Office of Tax and Revenue): April 30th (30 days after IRS deadline, including any extensions)
• Massachusetts:
  • Individual Delivery (MA 1099-HC Form): January 31st
  • State Filing (1099-HC Form data - submit XML file to MassT ax Connect system): January 31st
• New Jersey:
  • Individual Delivery (Form 1095): March 2nd
  • State Filing (Form 1094 and 1095 to the NJ Department of Treasury): March 31st
• Rhode Island:
  • Individual Delivery (Form 1095): March 2nd
  • State Filing (Form 1095 to the RI Division of Taxation): March 31st

If your company operates in numerous states, each new individual mandate adds a new layer of complexity and may increase penalty risk. Instead of complying with one individual mandate across the country, you will now be tasked with meeting each individual mandate as it applies to individuals in those states. Be sure to research the specific requirements for each state where your employees reside.

What’s at Stake?

The IRS takes ACA reporting seriously, and failure to comply can result in significant penalties*:

• Financial Penalties: The most obvious risk is the hefty financial penalties for not meeting regulatory requirements. These can range from thousands to millions of dollars depending on the size of your company and the nature of the violation.
  • Failure to File: Penalties can range from $60 to $340 per return, depending on the length of the delay in filing. This can quickly add up to thousands or even millions of dollars for large employers.
  • Failure to Furnish: Penalties can range from $60 to $340 per return, depending on the length of the delay in furnishing the forms to employees.
  • Incorrect or Incomplete Information: Penalties can be assessed for filing incorrect or incomplete information on ACA forms.
  • Employee Backlash: If your employees discover that their healthcare coverage wasn't handled correctly, it can lead to a loss of trust. This could negatively impact morale, productivity, and even your company's reputation.
  • Legal Troubles: In extreme cases, you may even face legal action from employees or government agencies.

To help calculate your potential risk, refer to our ACA Potential Penalty Risk Calculator or download our ACA Penalty Response Checklist.  

Tips for Smoother ACA Reporting

ACA reporting doesn't have to be a headache. Here are some tips to help you streamline your process:

• Start Early: Don't wait until the last minute. ACA reporting is a year-round process. Begin gathering data and reviewing your processes early to help avoid a stressful rush.
• Embrace Technology: ACA reporting software can help automate many of the tedious tasks involved in data collection and form generation. 
• Invest in ACA Expertise: Whether it's an in-house ACA specialist or an external consultant, having someone who is well-versed in ACA requirements can be critical.
• Educate Your Employees: Educate your employees about their healthcare options and the information they need to provide to HR. Clear communication can help prevent misunderstandings.

ACA Reporting as a Strategic Tool

ACA reporting can also serve as a valuable strategic tool for your business:

• Workforce Insights: The data collected for ACA reporting can provide insights into your employees' healthcare needs and utilization patterns. This information can help you make better informed decisions about your benefits offerings and wellness programs.
• Recruitment and Retention: Demonstrating ACA requirements are met can help enhance your company's reputation as an employer of choice.
• Cost Management: By analyzing your ACA reporting data, you may be able to identify opportunities to better optimize your healthcare spending and help control costs.

Strategic Approach to ACA Reporting

To successfully navigate the complexities of ACA reporting, HR professionals need a proactive and strategic approach. This includes staying informed about regulatory changes, leveraging technology, and viewing ACA reporting as an opportunity to gain valuable workforce insights and improve benefits offerings.

By embracing ACA reporting as a strategic priority, HR professionals can help protect their companies from penalties, foster a healthier and more productive workforce, and contribute to a more equitable healthcare system. ACA reporting is an essential part of doing business in today's regulatory environment. By understanding the requirements, utilizing available resources, and taking a proactive approach, you can help ensure regulatory requirements are addressed, better protect your business from penalties, and leverage ACA reporting as more of a strategic asset.

*Source: IRS.gov

The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel.  Equifax Workforce Solutions provides services that can help employers reduce their compliance risks. Details on our provision of these services and related support will be contained in your services agreement. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.