ACA Reporting
The Basics of ACA Compliance and Reporting
How Does ACA Reporting Work?
The Affordable Care Act (ACA) changed requirements for the types of health insurance plans qualifying employers must offer to meet affordable insurance standards. This law also carries ACA reporting compliance requirements for employer-sponsored health plans. These requirements include employee notices, IRS reporting for Applicable Large Employers (ALEs), and employer reporting for self or level-funded insurance plans, regardless of employer size.
Meeting these reporting requirements is essential to avoiding costly fines and penalties. Many employers who qualify as an ALE do not realize they have to meet these requirements, so it’s essential to understand your responsibility regarding ACA compliance.
Is your organization required to complete ACA reporting?
Any organization that meets ALE requirements, must comply with ACA regulations. An ALE is any employer with 50 or more full-time or full-time equivalent employees. To determine ALE status, employers must take an average of all employee hours to determine if they meet the full-time equivalent requirement. Those who meet this requirement must offer minimum essential coverage to at least 95% of their full-time employees and the coverage must meet minimum values.
The ACA reporting codes are complicated and, if done incorrectly, can result in fines for your organization. While a good-faith waiver was granted at first for mistakes on forms filed, as of 2021, the IRS no longer grants penalty relief for good-faith efforts to comply with ACA filing regulations.
Employers are starting to see letter 1865-C for filing periods through 2020 stating missing or incorrect forms. These letters can be sent out multiple times, even on forms that were filed correctly. It is recommended to use e-filing to reduce these filing issues.
What Does Full-Time Equivalent Mean?
When determining Applicable Large Employer status, employers must average the hours of part-time and seasonal employees against full-time hours. If these calculations provide a combination of full-time hours among non-full-time employees, those hours are considered full-time equivalent.
Applicable Large Employer or ALE status occurs if an employer has 50 or more full-time and full-time equivalent employees.
Tracking FTE Status:
For employers who already qualify as an ALE, employers are required to track hours for part-time and seasonal employees. This can be tracked in two different ways.
Monthly Tracking: Employers can track hours for variable employees monthly. If employees meet full-time hours for one month, coverage must be offered for the following month.
Look-Back Tracking: An employer can also use a look-back measurement period to track hours based on a period anywhere from three months to twelve months. If full-time hours are met during the period tracked, the employer is required to offer coverage for an equivalent period.
ALE Calculator
If you are unsure whether you are considered an ALE, you can download our free ALE calculator to help average employee hours. Providing accurate and detailed information when completing reporting forms and maintaining accurate records are your best defenses against IRS penalties. Our ACA services and tools provide essential and affordable solutions for employers to determine and complete their ACA reporting requirements.
ACA Safe Harbor Calculations
Those who meet ACA compliance requirements must also meet requirements to offer affordable coverage for eligible employees. Premium affordability is based on three possible safe harbor calculations:
- Federal Poverty Line Threshold
- Rate of Pay
- W-2 box 1 earnings
The calculations used to determine affordability are based on employer determinations. Each calculation has its pros and cons. Download our free Safe Harbor Calculator (see below) to determine the best calculator to ensure you meet affordability requirements.
ACA Compliance Deadlines
Meeting ACA compliance deadlines is essential as the IRS may impose penalties of up to $310 per form for failing to furnish an accurate form to employees and $310 per form for failure to file an accurate form with the IRS. Penalties continue to increase if IRS penalty letters are not addressed.
ACA forms for filing
Forms 1094-C and 1095-C: Employers with 50+ full-time or full-time equivalent employees must use forms 1094-C and 1095-C to report fully insured and self-insured plans. Once the information has been completed for each employee, it must be transmitted to the IRS using submittal form 1094-C.
Form 1094-B and 1095-B: Employers with fewer than 50 full-time or full-time equivalent employees who provide employer-sponsored self-or level-funded insurance coverage, must file using forms 1094-B & 1095-B.
ACA Reporting Services Your Way
Service levels for ACA Reporting:
- E-filing services: We will provide you with a template to include company, employee and dependent (if applicable) information along with the required ACA coding and return to us for filing with the IRS through their AIR system.
- Standard White-Glove Service: Gain access to an ACA Specialist who will work with you to gather information about your benefits and your most recent open enrollment(s) and provide the resources to help you complete the reporting requirements.
- Premium White Glove Service: Gain access to a dedicated ACA Specialist who will work with you to gather and complete the reporting requirements.
Employers required to file 10+ forms must file electronically as of January 1, 2024.
Access the ACA Reporting Template below to make sure you have all the information you need to complete your ACA reporting requirements.
Meeting Your ACA Reporting Needs
We offer a wide range of resources and services designed to provide multi-faceted ACA support.
1094-C and 1095-C Forms
Our ACA specialists will help you determine the information you need for filing and will complete the required 1094-C & 1095-C documents. We will e-file with the IRS on your behalf for all ACA filing needs including forms and correspondence. We also take the guesswork out of determining the appropriate filing codes to meet ACA compliance. *We can also take care of employee notification distribution, for an additional fee.
IRS Inquiry Letters
We will help complete responses if you receive inquiry letters from the IRS that are inaccurately triggered. This can include letters 226-J, 5699, and 1865-C.
1094-B and 1095-B Forms
Our ACA compliance services include filing 1094-B and 1095-C forms for employers who provide self-funded or level-funded coverage.
State ACA Form Filing
The ACA filing service includes filing for states requiring state-level reporting. These states include Rhode Island, Washington D.C., California, and New Jersey.
Dedicated ACA Specialist
Your assigned ACA specialist will walk you through the process of gathering the required information and will complete the reporting forms, based on your insurance plan information and employee data.
Help Desk Services
We have a help desk available to answer specific questions about ACA reporting. This is available to employers who do not require full reporting services but need help in certain areas
Client Testimonial
HR Service has been a key partner in delivering compliance resources and support to our employee benefit clients across the US. As a broker for many years, we’ve worked with countless vendors and attorneys on compliance issues, specifically the ACA, and our experience with HR Service and our account manager Holly has been far and away from the best service we’ve had in the health and welfare arena. Their detailed responses, willingness to talk through tough issues with our clients, and flexibility in responding to our needs blow away the competition and not to mention their competitive pricing and ease of access to their platform and support team. They make our firm more profitable by leveraging their tools and delivering better service, all while freeing us up to focus on sales and other opportunities. Specifically, we’ve had the best service team, and Holly has become our go-to for all of our ACA reporting and compliance needs. I can’t express enough how enjoyable she is to work with and how grateful we are that we’ve been able to work together and will continue to do so.
Providing Affordable and Powerful Solutions
ACA FAQ
ACA reporting is required by all organizations that meet Applicable Large Employer (ALE) requirements. The reporting must also be completed by employers who average less than 50 FT or FTE employees but are self-insured or level funded. The employer is considered the insurer in these instances and therefore the 1094 and 1095 B Forms must be submitted each year to show employees and any dependents that were covered by health insurance.
An ALE or Applicable Large Employer is any organization with 50+ full-time or full-time equivalent employees. To determine if your company meets these requirements, you can download our free ALE calculator.
The most common penalties received are Section 4980H (a) and (b), also known as penalty A and penalty B. These penalties increase each year.
2023
• 4980H (a) = $2,880
• 4980H (b) = $4,320
2024
• 4980H (a) = $2,970
• 4980H (b) = $4,460
The A penalty is assessed when the employer does not offer health insurance to at least 95% of their full-time employees that meets ACA requirements of minimum essential coverage. This penalty is assessed on all FT employees for each month the employer did not meet ACA requirements, minus the first 30 employees. If even one employee receives a premium tax credit and the employer does not correctly mark the box that states they offer MEC, they will receive the penalty.
The B penalty is assessed when a MEC plan is offered but does not meet minimum value or affordability requirements. These penalties are only assessed on the employees who did not receive a qualifying offer and who went to the Marketplace to enroll in medical coverage and received a premium tax credit.
Letter 226-J is an initial letter the IRS sends to ALEs to notify them that they may be liable for an Employer Shared Responsibility Payment (ESRP). Employers receive these letters if the IRS believes there was a failure to offer MEC or a failure to meet minimum value requirements. Employers are likely to see one of these letters if an employee files for a premium tax credit.
Letter 227 includes a series of letters based on a review of an employer’s ESRP liability. These letters are a follow-up to the 226- J letter providing an acknowledgment that a response to 226-J was received, giving an update on the ESRP status, and offering the next steps to close the review or contest it.
Letter 5699 gets sent if the IRS believes that an employer met the requirements as an ALE for a tax-filing year but did not file ACA reporting documents. This letter is triggered based on the number of W2s filed for the tax year in question. If more than 50 W2s were filed, the IRS may assume the employer is an ALE under the full-time equivalent regulations and must comply with ACA reporting requirements. The employer is required to respond to the letter, indicating whether they were an ALE or not. If the employer was an ALE, they must file the forms and a reason for filing late.
Letter 5698 gets triggered if the employer fails to respond to Letter 5699. This letter reminds the employer they have not responded, and they need to do so immediately, or risk penalties based on their W2 filings.
Letter 5005-A is the penalty notice following Letters 5699 and 5698. This letter focuses on the failure of ALEs to distribute 1095-C forms to employees and to file 1094-C and 1095-C forms with the federal tax agency by the required deadlines.
CP215 acts as the official “bill” received after the 5005-A. The 5005-A is not a request for payment, and the employer still has a chance to respond to the IRS before penalties are applied.
Letter 916C comes as a notice from the IRS indicating a claim or request is incomplete and cannot be processed. The letter will recommend filing the forms electronically.
Notice 972 CG is a proposed penalties notice sent when returns are filed after their due date, when returns were filed on paper but exceeded the 250 returns threshold that requires electronic filing, or when returns were filed with an incorrect or missing TIN.
Letter 1865C - letter sent to inform an employer that the IRS is unable to process the 1094/95 B or C forms because the forms are incomplete or not in the required format OR the 1094 B or C was missing. The letter asks that the employer resubmit the forms by a certain date.
The interesting thing we have found with this notice to some of our previous clients is 1) They receive multiple versions of the letter that say different things. 2) The fax or phone number is either missing, not working, or goes to a source who does not clearly identify themselves as IRS. 3) General delays with IRS operations erroneously sent penalty notices to clients who filed as requested. 4) The IRS sends out these letters even to clients for who we have 100% confidence that all the forms were submitted correctly and timely.
The Affordable Care Act (ACA) was enacted to ensure affordable health insurance is available for more people in the United States. The law provides subsidies, called premium tax credits, to lower insurance costs for households with income between 100% and 400% of the federal poverty level.
Rhode Island and Washington D.C. have enacted requirements on the state level for all levels of health coverage. California and New Jersey have requirements for self-funded coverage only. Massachusetts has its own form for filing.
Each of these states have enacted individual mandates. This includes employers in the state and employers with employees in the state.
The IRS has set the 2023 rate at 9.12%.
2024 rate: 8.39%
Minimum Value (MV) – An employer-sponsored plan provides minimum value if it covers at least 60 percent of the assumed cost for the standard population to cover the benefits provided. This is the equivalent of a bronze-level plan.
Minimum Essential Coverage (MEC) – MEC refers to types of coverage that satisfy the ACA’s individual mandate. This typically involves insurance policies that provide major health coverage. ALE-qualified employers must offer MEC to at least 95% of their full-time employees.
Affordability – Affordability deals with providing plans with premiums that are affordable based on one of three safe harbor calculations. Under the employer-shared responsibility affordability safe harbors, employers are allowed to use Form W-2 wages, an employee’s rate of pay, or the federal poverty line.
The Affordability Threshold for 2023 is 9.12%.
The 2024 threshold is 8.39%.
Safe Harbor Calculator
Calculate ACA affordability with our Safe Harbor Calculator.
