What is ACA Reporting?
The Affordable Care Act (ACA) significantly changed the U.S. healthcare system, especially for employers and individuals. One of the key aspects of the ACA is the reporting requirements that employers and health insurers must follow. These requirements help ensure adherence to the ACA’s mandates and provide the IRS with essential information for enforcement. In this blog post, we’ll overview ACA reporting requirements, delve into the various reporting forms, and explore state-specific mandates that employers must be aware of in 2025.
ACA reporting deadlines you need to know for 2025
Staying ahead of ACA reporting deadlines is critical for maintaining compliance and avoiding costly penalties. For the 2025 reporting year, employers must adhere to the following key deadlines:
- February 28, 2025: Paper filers must submit Forms 1094-C and 1095-C to the IRS by this date. Note that paper filing is only available for employers filing 10 or fewer forms.
- March 3, 2025: Employers must furnish Forms 1095-C (or 1095-B for self-insured employers) to their full-time employees. These forms provide details about the health coverage offered during the prior calendar year.
- March 31, 2025: Employers filing Forms 1094-C and 1095-C electronically must submit their forms to the IRS by this date.
Missing these deadlines can result in escalating penalties, so it’s essential to maintain a compliance calendar and submit forms promptly. Employers are encouraged to verify all filing dates with the IRS to ensure accuracy.
What Are the ACA Reporting Requirements?
The ACA introduced a range of reporting obligations for employers, insurers, and individuals. These obligations ensure compliance with the ACA’s mandates and help the IRS enforce penalties on those who fail to comply. The reporting requirements are complex and vary depending on the size of the employer, the type of health coverage offered, and the state in which the employer operates.
Calculating full-time equivalents for ACA reporting
To determine if an employer is subject to ACA reporting requirements, it’s essential to accurately calculate the number of full-time employees and full-time equivalent (FTE) employees. Under the ACA, a full-time employee works 30 hours or more per week. Employers must add the hours of part-time employees to calculate FTEs, which count toward the 50-employee threshold designating an Applicable Large Employer (ALE). Tracking FTEs accurately helps ensure compliance and avoid potential penalties.
ACA reporting requirements and health coverage offered to employees
Employers must ensure they offer minimum essential coverage that is both affordable and provides minimum value to full-time employees. Minimum value means that the plan covers at least 60% of total allowed costs of benefits provided to employees. Coverage is considered affordable if the employee’s required contribution for self-only coverage doesn’t exceed a specific percentage of their household income. By meeting these standards, employers satisfy their ACA obligations and help employees access reliable health coverage.
History of state ACA reporting
Congress signed the ACA into law in 2010, but reporting requirements took effect in 2015. Since then, employers with 50 or more full-time employees (or equivalents) must report information about the health coverage they offer. The IRS uses these reports to verify compliance with the employer mandate and determine whether individuals qualify for premium tax credits under the individual mandate.
The employer mandate
The employer mandate, also known as the Employer Shared Responsibility Provision, requires employers with 50 or more full-time employees to offer affordable health insurance that provides minimum essential coverage. Employers who fail to meet this requirement may face penalties.
The individual mandate
The individual mandate required most Americans to have health insurance or face a penalty, but the federal penalty dropped to $0 starting in 2019. However, some states have implemented their own individual mandates, which still require residents to have health coverage or pay a penalty.
Who needs to file?
Different types of employers have varying ACA filing responsibilities. Generally, ALEs with 50 or more FTEs must file ACA reports with the IRS. Self-insured employers, even those with fewer than 50 full-time employees, may also be required to file if they provide health insurance directly to their employees. Knowing whether your business falls into one of these categories ensures compliance and avoids filing penalties.
Businesses affected by ACA reporting
The ACA reporting requirements apply to a broad range of businesses, and understanding which organizations are subject to these rules is essential for compliance.
- Applicable large employers (ALEs): Businesses with 50 or more full-time employees or full-time equivalents must file forms 1094-C and 1095-C to report health coverage offered to their employees.
- Smaller, self-insured employers: Even employers with fewer than 50 full-time employees may need to file if they provide health insurance directly to employees.
- Multi-state employers: Businesses operating in multiple states may face additional state-specific ACA reporting obligations, depending on state mandates.
By identifying whether your business falls under these categories, you can determine your reporting responsibilities and avoid potential penalties.
ACA reporting for smaller, self-insured employers
Small employers who self-insure their health coverage are not exempt from ACA reporting requirements. They must:
- File Forms 1095-B: These forms provide details about the health coverage offered, including months of coverage and the employees enrolled.
- Submit Form 1094-B: This transmittal form summarizes the information provided in the 1095-B forms.
Even though these employers are smaller, failing to meet ACA reporting obligations can result in significant penalties. Partnering with compliance experts or using automated reporting software can simplify this process.
Compliance insight
Remaining compliant with ACA reporting requires careful monitoring and data management. This involves tracking employee hours and health coverage offerings, as well as implementing processes to verify accuracy and consistency in filings. Many companies find it beneficial to establish internal compliance checks or partner with vendors specializing in ACA compliance to streamline the process and reduce risks of noncompliance
How to determine affordability?
Employers have three primary methods, or “safe harbors,” to determine whether the coverage they offer meets the ACA’s affordability standard.
W-2 safe harbor
Determines affordability by calculating the employee’s required contribution based on their total wages, as reported on their W-2 form.
Rate of pay safe harbor
Uses the employee’s hourly rate of pay or monthly salary at the start of the coverage period to determine affordability, multiplying it by 130 hours for monthly coverage.
Federal poverty line safe harbor
Bases affordability on the federal poverty line, simplifying the process for employers to ensure that their lowest-paid employees have affordable options.
By selecting the most appropriate safe harbor, employers can reduce their risk of failing to meet affordability standards.
ACA reporting forms
Form 1095-A
The Health Insurance Marketplace issues Form 1095-A to individuals who purchased health insurance through the exchange. This form provides the information needed to claim the premium tax credit.
Form 1095-B
Insurance providers, including self-insured employers with fewer than 50 full-time employees, issue Form 1095-B to report the type of coverage they provide to individuals and their dependents.
Form 1095-C
Applicable Large Employers (ALEs) use Form 1095-C to report information about the health coverage they offer to their employees. The form details whether the employer offered coverage, the cost of the coverage, and the months the employee was eligible for it.
Form 1094-B
Employers submit Form 1094-B to the IRS along with Form 1095-B; consequently, both forms are necessary for complete reporting. Form 1094-B provides summary information about the forms being filed.
Form 1094-C
Employers submit Form 1094-C to the IRS alongside Form 1095-C. This form provides summary information about the forms being filed and reports whether the employer offered coverage to at least 95% of its full-time employees.
Managing the annual ACA reporting process
ACA reporting deadlines can vary each year, so it’s important to verify dates with the IRS and ensure that all filings are completed on time. Missing these deadlines can result in steep penalties, which increase with each delayed filing, making it crucial for employers to maintain a clear timeline.
Penalties for late filing or failing to furnish ACA forms to employees can be costly. To avoid these, employers should conduct a thorough review of all forms before submission, ensure employee information is correct, and file by the deadline. Partnering with a vendor or using automated filing software can also minimize the risk of errors and late submissions, giving employers peace of mind.
Important penalties to avoid
Failing to comply with ACA reporting deadlines can lead to substantial financial penalties:
- Failure to furnish forms to employees: The penalty for not providing employees with required forms by the deadline is $310 per form in 2025, capped at $3,783,000 annually.
- Failure to file with the IRS: Late or incomplete filings with the IRS result in additional penalties of $310 per form.
- Intentional disregard: If the IRS determines there was intentional failure to file, penalties increase significantly with no annual cap.
To avoid these fines, ensure accurate and timely filing, and consider leveraging automated solutions to reduce errors.
Assessments for failure to offer affordable and adequate health insurance
Employers who fail to offer health insurance that meets the ACA’s affordability and minimum value standards to their full-time employees may face significant penalties. The ACA outlines two primary types of assessments under the Employer Shared Responsibility provisions:
Section 4980H(a) penalty
This penalty applies if an employer fails to offer minimum essential coverage to at least 95% of their full-time employees (and their dependents) and at least one employee receives a premium tax credit for purchasing coverage through the Marketplace. For 2025, the annual penalty is $2,900 per full-time employee, excluding the first 30 employees.
Section 4980H(b) penalty
This penalty applies if an employer offers coverage that is not affordable or does not provide minimum value, and at least one employee receives a premium tax credit. For 2025, the penalty is $4,350 per affected employee annually.
To avoid these assessments, employers should regularly review their health plans to ensure compliance with ACA standards. This includes confirming affordability using safe harbors and ensuring minimum value by covering at least 60% of total allowed costs.
HIPAA privacy and security information
When collecting employee data for ACA reporting, employers must consider HIPAA privacy and security requirements. ACA forms contain protected health information (PHI), so it’s essential to follow HIPAA-compliant processes, including using secure storage solutions, limiting access to sensitive data, and ensuring that any vendors handling the data are HIPAA-certified.
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- Use caution when collecting sensitive data: Limit the collection of data to only what’s necessary for reporting.
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- Ensure PHI precaution measures are in place: Implement strict access controls and monitor access to health data.
- Verify vendors are HIPAA-certified: If outsourcing ACA reporting, confirm that vendors comply with HIPAA standards for data security.
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E-filing for secure, streamlined filing
The IRS strongly encourages electronic filing for ACA forms, which is mandatory for employers filing 250 or more forms. E-filing streamlines the process, reduces paperwork, and improves accuracy. It’s also a more secure way to transmit sensitive information, ensuring compliance with both ACA and HIPAA requirements.
Eligibility for ACA reporting
Employers with 50 or more full-time employees, including full-time equivalents, must file ACA forms with the IRS. These employers are known as ALEs. Employers with fewer than 50 full-time employees may still have reporting obligations if they offer self-insured health coverage; thus, they must be aware of these requirements.
Conclusion
By understanding and effectively managing ACA reporting requirements, employers can avoid penalties while ensuring compliance with both federal and state regulations. As 2025 approaches, it’s crucial to stay informed about changes in ACA rules and state-specific mandates to maintain compliance and protect your business.
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.
