Affordable Care Act (ACA) Information Reporting Penalties
The Affordable Care Act (ACA) introduced a framework that significantly reshaped healthcare in the U.S., including a robust reporting system for employers. Information Reporting Penalties (IRP) are essential for enforcing compliance with ACA mandates.
These penalties serve as a deterrent against non-compliance with reporting requirements and ensure that employees receive accurate information regarding their health insurance coverage. Understanding these penalties is crucial for HR departments and employers who wish to avoid costly fines.
Need an ACA solution for the 2024 reporting year?
Overview of 2025 ACA pay or play penalties
The ACA’s “Pay or Play” provisions impose penalties on large employers that fail to offer minimum essential coverage or offer unaffordable health plans. Starting in 2025, employers must navigate these penalties with increased vigilance to avoid financial repercussions.
HR responsibilities
HR departments bear the brunt of ACA compliance responsibilities. They must ensure that the employer reports accurate information on IRS Form 1095-C, detailing employee coverage. This includes managing the collection of data related to health coverage offered and ensuring timely submissions to the IRS and employees. Inadequate reporting can lead to significant penalties, highlighting the importance of diligence in these obligations.
State Controller’s Office (SCO) reporting
In addition to federal requirements, state-specific reporting may also be necessary. The State Controller’s Office (SCO) often imposes its own reporting requirements, which can include additional data on health benefits provided to employees. Compliance with these state requirements is just as critical as federal reporting to avoid additional penalties.
Penalties for incorrect 1095-C statements
IRPs for incorrect 1095-C filings
Filing inaccurate or incomplete 1095-C statements can result in substantial penalties. Employers are responsible for ensuring that all information reported is correct and in compliance with IRS regulations.
Historically, employers could receive penalty relief for certain incorrect filings, but this relief has been phased out since 2021. Employers must now be more vigilant than ever to ensure compliance.
Penalties for failure to file and failure to provide correct 1095-C forms
The penalties for failure to file Form 1095-C or for failing to provide correct forms to employees are also severe. Employers may face similar penalties as outlined for incorrect filings, compounding the financial implications of non-compliance.
2025 ACA pay-or-play penalties
“A” penalty: Minimum essential coverage not offered (full-time employees)
The “A” penalty applies when an employer does not offer minimum essential coverage to its full-time employees. For 2025, the penalty can be assessed at a rate of $2,900 per full-time employee, excluding the first 30 employees.
“B” penalty: Unaffordable or insufficient coverage
The “B” penalty is imposed when an employer offers coverage that is deemed unaffordable or insufficient, resulting in employees receiving premium tax credits. The penalty for this scenario is $4,350 per employee who receives the tax credit.
Definitions of affordability and minimum value
To understand these penalties, employers must grasp the definitions of affordability (coverage costing no more than a certain percentage of an employee’s household income) and minimum value (coverage that pays at least 60% of expected medical costs).
Penalty amounts and how they are calculated
Penalties are calculated based on the number of full-time employees and the nature of the non-compliance. Employers must account for these calculations when planning their health benefits strategy.
Phased approach for HR (2021-2023)
Breakdown of responsibility across years
-
- 2022: Responsibility increased to 75% as organizations adapted to more stringent requirements.
Examples of IRP data for departments and campuses
Employers can expect varied penalty outcomes based on their compliance efforts. Different institutions may experience significantly different impacts from IRPs compounding over time, making it essential for all departments and campuses to stay vigilant in their reporting practices.
IRP appeal process
Employers who face penalties can review and appeal through designated IRS processes. HR offices should familiarize themselves with these procedures to mitigate financial impacts when possible.
Conclusion
In summary, staying informed about ACA Information Reporting Penalties is essential for employers and HR professionals. The penalties for non-compliance can be steep, but understanding the requirements and responsibilities can help organizations navigate this complex landscape effectively. By prioritizing accurate reporting and compliance, employers can protect themselves from costly penalties and foster a healthier workplace environment.
The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter. The reader should not act or refrain from acting on the basis of any content included in this article without seeking tax, legal, or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address the reader’s situation. ebm disclaims all liability for actions the reader takes or fails to take based on any content within this article.