aca reporting services

ACA Reporting

The Affordable Care Act 

 

The Affordable Care Act was created to make health insurance affordable & available to more people in the United States. The law provides consumers with subsidies (“premium tax credits”) that lower costs for households with incomes between 100% and 400% of the federal poverty level (FPL). People eligible for a premium tax credit get help buying healthcare insurance under the ACA. In order to be eligible, you need to have an annual salary up to or equal to the federal poverty level. For an individual, that means an income of at least $12,880 by 2022. The law also carries employer compliance requirements for employer-sponsored health plans including Employee Notices, employer reporting for Applicable Large Employers (ALEs) and employer reporting for self/level-funded insurance plans, regardless of size. States have begun implementing their own individual mandates to control healthcare costs. Rhode Island, New Jersey, California, Massachusetts, Vermont, and the District of Columbia have enacted state-level ACA reporting, with more on the way.

ACA Safe Harbor Reporting Codes 

The Affordable Care Act or ACA safe harbor reporting codes are complicated and, if done incorrectly, can result in fines for your organization. Starting in 2021, the IRS no longer grants penalty relief upon showing good-faith efforts to comply with ACA regulations, making accurate and detailed reporting more important than ever. Our ACA Service provides affordable solutions for employers who are required to comply with the ACA Reporting requirements.

ACA Deadlines

Starting in 2021, the IRS permanently extended the employee distribution deadline. Employers will not be able to request additional time to distribute forms to employees.

The IRS may impose penalties up to $280 per form for failing to furnish an accurate form to employees and $280 per form for failure to file an accurate form with the IRS. These penalties double for intentional disregard of filing responsibilities. The ACA filing deadlines for 2022 are: 

1095-C forms delivered to employees 

March 2nd

Paper Filing with the IRS* 

Feb 28th

Electronic Filing with IRS**

March 30th

*Employers that file 250 or more information returns with the IRS must file electronically

Form 1094-C and 1095-C:

Employers with 50+ employees will need to use these forms to report both fully insured and self-insured plans. Once completed for each employee, they must be submitted to the IRS using submittal form 1094-C.

Form 1094-B and 1095-B:

Employers with fewer than 50 employees who provide employer-sponsored self-insured health coverage will use forms 1094-B & 1095-C & 1095-B & 1095-C. ALEs also are subject to the employer shared responsibility payment provisions. You may have to make a shared responsibility payment if at least one full-time employee receives the premium tax credit for purchasing individual coverage through the Health Insurance Marketplace and you: failed to offer coverage to at least 95 percent of full-time employees and their dependents, or offered coverage to at least 95 percent of full-time employees, but not to the full-time employee receiving the credit (one of the 5 percent) or offered coverage that was not affordable or offered coverage that did not provide a minimum level of coverage.

The Affordable Care Act (ACA) Services

If you are looking to simplify the process of ACA reporting, we can help. We offer a wide range of resources and services designed to make your life easier.

Why HR Service for ACA Reporting?

We ensure forms are accurate according to the data provided, eliminate the hassle of determining codes, are reasonably priced, and work to ensure completion within IRS timelines. We can make adjustments and corrections, as needed, and provide support in responding to IRS correspondence.

1094-C and 1095-C Forms

We will create the required 1094-C & 1095-C documents or any other documents needed.

Letter 226-J

We can help if you receive letters from the IRS on past reporting errors, letters 226-J.

IRS Filing

We will efile with the IRS on your behalf or you have the option of printing and mailing from your location.

Series Codes Determined

We Determine 1 & 2 Series Codes on your behalf.

We Make ACA Simple

All you need to do is work with your assigned ACA Expert, who will ask for necessary information, then complete the reporting for you. You have the option to either mail forms yourself or to have us take care of them.

Dedicated ACA Analyst

Your assigned analyst performs stress-free document collection. They are here to ensure you are safe from future potential IRS problems.

IRS Letters

The IRS has been sending various letters about Affordable Care Act Compliance. This is a summary of the types of letters that are currently being sent out:

J226: These letters detail penalties based on not offering minimum value / minimum essential coverage (MV/MEC) and/or Affordable coverage under the requirements of 4980H (a) (b). Currently, the IRS is notifying employers and assessing penalties back to the 2015 ACA reports. They are initiated when an employee has enrolled in health coverage on the Marketplace and received a Premium Tax Credit towards the cost of their health coverage. HR Service has found that, with most of these letters, the forms that were submitted were either incorrect or incomplete. Employers have been successful in responding to the IRS and having the penalties canceled once the employer identifies the corrections and/or clarifications needed by the IRS.

227M: Following the J226 letter is the 227M letter in which the IRS says that after review they are still assessing a penalty under the 4980H (a) (b). Once an employer receives this letter, the IRS requires that the employer either call them to request a meeting or that the employer file a formal protest. If the employer and the IRS don’t reach an agreement or if the employer doesn’t respond to the letter with a call or formal protest, the matter then must go through an IRS Appeals process.

5699: The IRS letter 5699 indicates that the IRS believes the employer might be an ALE and details the requirements and obligations for filing. This letter is initiated when the IRS cross-references the number of W2 forms that were filed. If there are more than 50 employees, the IRS assumes that the employer may be an Applicable Large Employer (ALE) and therefore must file and 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 1094/1095 C forms and explain why they are filing late and when they will file the forms.

5698: Failure to respond to the 5699 letters will trigger a subsequent notification of IRS Letter 5698, which reminds the employer that they have not responded to IRS Letter 5699 and that they need to immediately, or they will be assessed a penalty. Failure to respond will lead the IRS to issue IRS Letter 5005-A and Form 886-A, which gives the amount of the penalty for not filing. The IRS determines the penalty amount by using the number of W2s that were filed and assumes it should be the same number of forms. These penalties are assessed under IRC 6721 and 6722.

IRS Penalties

As discussed above, the penalties the IRS is currently assessing include:

The IRC 4980H (a) penalty is assessed when an employer does not offer “minimum essential coverage” (MEC) to at least 95% of its full-time employees and their dependents.

The IRC 4980H(b) penalty is assessed when an employer does offer MEC to at least 95% of its full-time employees and their dependents, but the coverage is not “affordable” or does not provide “minimum value.” Penalties under IRC 6721 and 6722 are not exclusive to Affordable Care Act Reporting; these penalties are assessed for not filing correct information returns and/or not furnishing correct payee statements. The penalty amounts for 2016-2019 filings are:

$50 per form if submitted within 30 days after the due date
$110 per form if submitted after 31 days and before August 1st of that year
$270 per form after August 1st or not at all (2016) and $280 per form in 2017-2019

Definitions

Minimum Value (MV) – An employer-sponsored plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan and provides substantial coverage for inpatient care and physician treatment.

Minimum Essential Coverage (MEC) – types of coverage that satisfies the ACA’s individual mandate, typically insurance policies that provide major health coverage.

Affordability – Because employers are not likely to know the household income of their employees, there are three safe harbors that an employer may use to determine affordability for purposes of the employer shared responsibility provisions. In general, under this 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, instead of household income in making the affordability determination. 

Safe Harbor Calculator Download

ACA FAQ

ACA Reporting must also be completed by employers who average less than 50 FT/FTE employees but are self-insured or level funded. IRS considers the employer as the insurer and therefore the 1094/1095 B Forms must be submitted each year to show which employee and each of their dependents were covered by health insurance the year prior.

Find out by downloading our ALE Calculator.

The premium tax credit is an income-based subsidy available to help people pay for private health insurance. It was introduced as part of the Patient Protection and Affordable Care Act (ACA) and aids individuals who earn up to 400% of the federal poverty level ($45,960 for an individual).

The Section 4980H(a) penalty, issued to ALEs that fail to offer minimal essential coverage to at least 95 percent of their full-time employees and their dependents, is $2,750 per employee, or $229.17 a month, for the 2022 tax year. The assessed amount will deduct 30 full-time employees from the total number of full-time employees.

The Section 4980H(b) penalty, issued per each employee that receives a premium tax credit/subsidy from a state or federal ACA marketplace exchange when the ALE does not offer a coverage option that meets the affordability threshold, is $4,120 per employee or $343.33 a month, for the 2022 tax year.

A correction notice sent by the IRS - Employers have 30 days from the date of the letter to submit corrected forms.

California, Massachusetts, New Jersey, Rhode Island, Vermont and  Washington, D.C., have enacted individual health coverage mandates to include the federal requirement of individuals obtaining ACA-compliant health coverage or pay a penalty tax.

The IRS has decreased the affordability percentage index for eligible employee affordable health care options from 9.81% to 9.61% for 2022. (A slight increase to 9.7% is projected for 2023.)

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