Understanding the Basics of ACA Reporting: A Comprehensive Guide

ACA Benefits eligibility

The Affordable Care Act (ACA), enacted in 2010, brought significant changes to the healthcare landscape in the United States. One of the critical components of the ACA is its reporting requirements, which apply to employers and other entities providing health coverage. These reporting requirements are designed to ensure compliance with the ACA’s employer mandate and to provide the IRS with information necessary to administer various aspects of the law. In this comprehensive guide, we will explore the basics of ACA reporting, including who needs to report, what needs to be reported, and how to comply with these requirements.


1. Overview of the ACA Employer Mandate


The ACA includes an employer mandate, often referred to as the “Employer Shared Responsibility Provisions” or “Pay or Play” provisions. Under this mandate, applicable large employers (ALEs) must offer minimum essential coverage that is affordable and provides minimum value to their full-time employees (and their dependents) or potentially face penalties.


  • Applicable Large Employers (ALEs): ALEs are generally defined as employers with 50 or more full-time employees, including full-time equivalent employees, during the preceding calendar year.
  • Full-Time Employees: For ACA purposes, a full-time employee is one who works, on average, at least 30 hours per week or 130 hours per month.
  • Minimum Essential Coverage: This refers to the type of health coverage an employer must offer to meet the ACA requirements. It must be affordable and provide minimum value.


2. Who Needs to Report?


The ACA reporting requirements primarily apply to two groups:


  • Applicable Large Employers (ALEs): As mentioned, these are employers with 50 or more full-time employees or equivalents. ALEs must report information about the health coverage they offered to their full-time employees.
  • Self-Insured Employers: Employers that sponsor self-insured health plans, regardless of size, must report information about the individuals enrolled in the coverage.


3. Forms Used in ACA Reporting


The IRS requires specific forms for ACA reporting, which vary depending on whether the employer is an ALE and whether they provide self-insured coverage. Here are the primary forms used:


  • Forms 1094-C and 1095-C: These forms are used by ALEs to report information about the health coverage offered to their full-time employees.
    • Form 1094-C: This is the transmittal form submitted to the IRS, summarizing the information provided on the 1095-C forms.
    • Form 1095-C: This form is provided to each full-time employee, detailing the coverage offered and the employee’s enrollment status.
  • Forms 1094-B and 1095-B: These forms are used by self-insured employers (who are not ALEs) and other providers of minimum essential coverage to report information about individuals enrolled in the coverage.
    • Form 1094-B: This is the transmittal form submitted to the IRS, summarizing the information provided on the 1095-B forms.
    • Form 1095-B: This form is provided to each individual enrolled in the self-insured plan, detailing their coverage.


4. Key Information Reported on Forms 1095-C and 1094-C


Understanding the specific information that needs to be reported on these forms is crucial for compliance. Here’s a breakdown of the key information required:


  • Form 1095-C:
    • Employee Information: Includes the employee’s name, address, and Social Security Number (SSN).
    • Employer Information: Includes the employer’s name, Employer Identification Number (EIN), and address.
    • Offer of Coverage: Information about the type of coverage offered to the employee, including whether it meets minimum essential coverage, provides minimum value, and is affordable.
    • Employee’s Enrollment Status: Details about whether the employee and their dependents were enrolled in the coverage for each month of the year.
    • Safe Harbor Codes: Codes indicating the affordability safe harbor method used by the employer, if applicable.
  • Form 1094-C:
    • Employer Information: Includes the employer’s name, EIN, and address.
    • ALE Member Information: Details about whether the employer is part of an aggregated ALE group.
    • Certification of Eligibility: Information about whether the employer is eligible for any transition relief.
    • Full-Time Employee Count: The number of full-time employees for each month of the calendar year.
    • Aggregated Group Information: Details about any other members of the aggregated ALE group, if applicable.


5. Deadlines for ACA Reporting


Timely filing of ACA forms is essential to avoid penalties. The deadlines for submitting ACA forms are as follows:


  • Forms 1095-C and 1095-B to Employees: These forms must be provided to employees by January 31 of the year following the calendar year to which the information relates.
  • Forms 1094-C and 1095-C to the IRS: These forms must be filed with the IRS by February 28 if filing by paper, or by March 31 if filing electronically.


6. Penalties for Non-Compliance


Failure to comply with ACA reporting requirements can result in significant penalties. Here’s a summary of potential penalties:


  • Failure to File Correct Information Returns: If you fail to file Forms 1094-C and 1095-C with the IRS, you may be subject to a penalty of $280 per return, with a maximum annual penalty of $3,426,000.
  • Failure to Furnish Correct Payee Statements: If you fail to provide Forms 1095-C to employees, you may be subject to a penalty of $280 per statement, with a maximum annual penalty of $3,426,000.
  • Intentional Disregard: If the failure to file or furnish forms is due to intentional disregard, the penalties increase significantly, with no cap on the maximum annual penalty.


7. Steps to Ensure Compliance


Given the complexity of ACA reporting, it’s important to take proactive steps to ensure compliance. Here are some best practices:


  • Determine ALE Status: Calculate the number of full-time employees and full-time equivalents to determine if your organization is an ALE.
  • Collect Necessary Information: Gather all required information about employees, coverage offers, and enrollment status well in advance of the reporting deadlines.
  • Use Technology: Utilize ACA reporting software to streamline the process and reduce the risk of errors. Many HR and payroll systems have integrated ACA reporting capabilities.
  • Review Forms Carefully: Double-check all forms for accuracy before filing to avoid penalties for incorrect information.
  • Stay Informed: Keep up-to-date with any changes to ACA regulations and reporting requirements. The IRS frequently issues guidance and updates that can impact reporting obligations.
  • Seek Professional Assistance: Consider consulting with benefits professionals, tax advisors, or legal experts who specialize in ACA compliance to ensure all requirements are met.


8. Special Considerations and Common Challenges


While the basics of ACA reporting are straightforward, there are several special considerations and common challenges that employers should be aware of:


  • Variable Hour Employees: Determining full-time status for employees with variable hours can be complex. The IRS provides guidelines on how to use look-back measurement periods to determine full-time status.
  • Aggregated ALE Groups: Employers that are part of an aggregated ALE group must coordinate reporting efforts with other group members, which can add complexity.
  • Affordability Calculations: Calculating affordability can be challenging, especially with varying employee contributions and differing definitions of household income. Employers can use one of three safe harbors (W-2 wages, rate of pay, or federal poverty line) to determine affordability.
  • Transition Relief: Certain transition relief provisions may apply, particularly for mid-sized employers or for specific plan years. Employers must understand and correctly apply any applicable relief.
  • Corrections and Amendments: If errors are discovered after filing, employers must file corrected forms with the IRS and provide corrected statements to employees.


9. The Role of Third-Party Administrators (TPAs) and Professional Services


Many employers choose to partner with third-party administrators (TPAs) or professional services firms to manage ACA reporting. These partners can provide valuable assistance in several areas:


  • Data Management: TPAs can help collect, organize, and maintain the necessary data for ACA reporting, ensuring accuracy and completeness.
  • Form Preparation and Filing: Professional services can handle the preparation and filing of Forms 1094-C and 1095-C, reducing the administrative burden on HR and payroll departments.
  • Compliance Monitoring: TPAs and compliance experts can monitor regulatory changes and ensure that your organization remains compliant with evolving ACA requirements.
  • Employee Communications: Professional services can assist with developing clear and effective communication materials to help employees understand their coverage and reporting requirements.


10. Future of ACA Reporting and Potential Changes


The ACA has been a topic of ongoing political debate, and changes to the law could impact reporting requirements. While the basic framework of ACA reporting has remained relatively stable, it’s important for employers to stay informed about potential changes:


  • Legislative Changes: Congress may pass legislation that modifies or repeals certain ACA provisions, affecting employer mandates and reporting requirements.
  • Regulatory Updates: The IRS and other federal agencies may issue new regulations or guidance that impact how ACA reporting is conducted.
  • State-Level Requirements: Some states have implemented their own healthcare mandates and reporting requirements, which can add additional complexity for employers operating in multiple states.


Employers should regularly review their ACA compliance strategies and stay engaged with industry associations, legal advisors, and benefits professionals to navigate any changes effectively.


ACA reporting is a critical component of compliance with the Affordable Care Act’s employer mandate. By understanding the basics of ACA reporting, including who needs to report, what forms are used, key information requirements, and deadlines, employers can take proactive steps to ensure compliance and avoid costly penalties.


Partnering with third-party administrators or professional services can provide valuable support, helping to manage the complexities of ACA reporting and stay current with regulatory changes. By staying informed and adopting best practices, employers can navigate the ACA reporting landscape successfully and maintain a compliant and efficient benefits program.


In conclusion, ACA reporting is not just a regulatory obligation but also an opportunity to demonstrate a commitment to providing valuable health coverage to employees. A thorough understanding and meticulous approach to ACA reporting can enhance your organization’s compliance, improve employee satisfaction, and contribute to the overall success of your benefits program.