The Affordable Care Act (ACA) is a landmark piece of legislation passed in 2010 that gave millions of Americans access to healthcare. Because most health insurance coverage in the United States is offered through employers, extensive reporting is required to remain compliant. ACA compliance and reporting for employers requires careful attention to detail when completing relevant tax forms and adhering to employer mandates set forth by the provisions outlined in the ACA. In this guide, we’ll delve into all you need to know about ACA compliance and ACA reporting to avoid costly penalties and keep your workforce satisfied.

Understanding ACA Compliance

ACA compliance refers to employers complying with the requirements set forth by the Affordable Care Act, also known as Obamacare, which was created to provide greater access to affordable health insurance coverage to underinsured or uninsured Americans. There are several key components of ACA compliance that employers need to be aware of, including:

 

  • Employer mandate: The ACA requires applicable large employers (ALEs), which are defined as organizations with 50 or more full-time or full-time equivalent employees, to provide affordable health insurance coverage to at least 95 percent of their full-time and full-time equivalent employees and their dependents. Under the ACA, a full-time employee is defined as an individual who works at least 30 hours per week or a minimum of 130 hours per month. To ensure employers aren’t only hiring part-time workers to avoid providing health insurance coverage, employers must also count full-time equivalent employees. To do so, employers must total the number of hours worked per month by part-time employees, with a maximum of 120 hours. 

  • Individual mandate: Under the 2017 Tax Cuts and Jobs Act, the individual mandate was eliminated from the ACA, which required individuals to have health insurance or face a penalty. While the individual mandate is no longer enforced on the federal level, states like New Jersey, California and Rhode Island, with more expected, are implementing individual mandates to ensure state residents have health insurance. With that said, employers need to be up to date on the ACA reporting and compliance requirements in the states in which they operate to avoid penalties and fines.

 

 

  • Minimum essential coverage: ALEs must provide minimum essential coverage to their full-time employees, which is coverage for common services, such as emergency services, prescription drugs, hospitalizations and preventative healthcare services.

  • Minimum value: Health insurance coverage offered by ALEs must provide minimum value, which means that at least 60 percent of the total cost is covered.

  • Affordability: ALEs who offer health insurance coverage to their employees must ensure the health insurance options they offer are affordable. This means that the employee’s premium on employee-only coverage can’t exceed 9.5 percent of their household income.

  • Employee notices: Employers must provide notices to their full-time and full-time equivalent employees who qualify for health coverage of their health insurance options.

 

These are some of the key provisions employers must abide by in order to remain compliant with the stipulations of the Affordable Care Act. While maintaining compliance and offering health coverage may seem complex and expensive, there are several benefits for employers. Employees who receive affordable health insurance coverage tend to be more productive, as their basic health needs are met, allowing them to focus on other areas of their lives, such as their careers. 

Additionally, offering health coverage helps employees gain access to preventative services like vaccinations and screenings to maintain their health without the fear of costly out-of-pocket expenses. Overall, remaining compliant with the ACA is a great way to improve employee satisfaction and demonstrate your commitment to their well-being.

HR rep happy to see that the company has complied with ACA requirements.

ACA Reporting Requirements

Along with the ACA compliance requirements listed in the previous section, there are several ACA reporting requirements employers must be up to date on to maintain compliance.

  • Form 1095-C: During tax season, applicable large employers must use Form 1095-C to report information on the health insurance coverage they offered to eligible employees throughout the year to the IRS. Employers must submit a copy to both the IRS and each employee, as employees can use this form to determine whether they qualify for the premium tax credit.
  • Form 1094-C: Employers must also submit Form 1094-C to the IRS. However, this form is not provided to employees. 1094-C is a form that employers attach to their 1095-C forms that go to the IRS. They act as a cover sheet, detailing employer information, such as the employer’s name, number of employees, contact information and the number of 1095-C forms being sent.
  • Deadlines: Deadlines are a key aspect of ACA reporting. Employers must provide 1095-C forms to employees by the end of January, while 1095-C and 1094-C forms are sent to the IRS either by the end of February if paper copies are being sent or by the end of March if these forms are submitted electronically. Only employers with 250 or fewer forms can file paper forms, while employers with 250 or more forms must submit electronically.

Common Challenges and How to Overcome Them

ACA compliance and reporting for employers can be complicated and time-consuming, and understanding some of the common challenges can help ensure a smooth reporting process come tax time. Below are some of the top challenges with ACA compliance and reporting and how to overcome them:

  • Data accuracy: Maintaining accurate records can be a complex tax due to the vast amount of information employers are required to keep track of. To maintain accurate records, collaboration between multiple internal departments, like HR and payroll, is necessary. Leveraging the help of ACA reporting services can help streamline the reporting process while maintaining accurate data.
  • Compliance: One of the top challenges for employers and the ACA is remaining compliant with its requirements. Employers must offer affordable health insurance coverage to their full-time employees that is no more than 9.5 percent of their household income. Additionally, changes are constantly being made to ACA compliance and reporting for employers, which means HR and payroll staff need to be up to date and work with compliance experts.
  • Employee eligibility: Not every employee qualifies for health insurance coverage, and employers need to know how to calculate which employees are considered full-time or full-time equivalent employees and which are considered part-time employees. Employers also need to keep track of which employees accept and decline coverage to ensure at least 95 percent of full-time employees are being offered coverage.
  • Marketplace notices: Employers need to ensure they’re responding to Marketplace notices, which are notices that inform employers that an employee qualifies for subsidies, which can trigger an employer mandate penalty.

Person working from home.

Penalties for Non-Compliance

Understanding the ACA means understanding the penalties for non-compliance. Failing to comply with ACA requirements, such as offering minimum essential coverage or affordable health insurance, can lead to ACA penalties. Here’s what’s at stake for employers who fail to comply with the 2024 ACA compliance requirements:

  • 4980H(a) Penalty: Employers failing to provide minimum essential coverage to at least 95 percent of their full-time or full-time equivalent employees and their dependents can face the 4980H(a) penalty, which can amount to $2,970/year ($247.50/month).
  • 4980H(b) Penalty: Employers failing to provide affordable health insurance coverage to eligible employees that meets the minimum value, or for employers with one or more employees purchasing subsidized health insurance coverage through the Marketplace, can face a penalty of $4,460/year ($371.67/month).

Along with non-compliance penalties issued by the IRS, there are other potential consequences employers can face when failing to comply with the ACA. To start, non-compliance can tarnish your organization’s reputation and hurt your bottom line. Additionally, employees may become disengaged or dissatisfied if they work for an employer that doesn’t care about their health and well-being. Ensuring ACA compliance can help you maintain a strong brand image while keeping your staff happy and healthy.

FAQs

What is ACA compliance reporting?

ACA compliance reporting requires employers to provide information to the IRS and its employees about the health insurance coverage they offer. To remain compliant with ACA reporting, employers must use forms 1095-C and 1094-C, which detail the coverage provided and whether it meets ACA requirements. By following the compliance requirements needed for accurate ACA reporting, employers can ensure their full-time employees are receiving access to affordable health insurance coverage for themselves and their dependents.

Yes, ACA reporting is required for 2024. Employers and health insurance providers must continue to report health insurance coverage information to the IRS and provide notices to employees of their coverage options. It’s important to note that there are several changes to the ACA for 2024, such as increased penalties from the years prior, as well as filing changes.

When it comes to ACA reporting, there are several important pieces of information employers need to provide when completing Forms 1094-C and 1095-C. Data needed for ACA reporting includes:

  • Employee information: This includes employee names, Social Security numbers and addresses, along with the number of full-time employees employed and the number of 1095-C forms issued.
  • Coverage details: This includes information on health insurance coverage offered, such as coverage offers, enrollment dates and dependents covered.
  • Coverage status: Employers must retain data on monthly coverage statuses for each employee.
  • Employer information: This includes employers’ EIN, contact details and address.

Small employers, which are those with fewer than 50 full-time employees, are generally not subject to the employer mandate that requires reporting through forms 1095-C and 1094-C. However, small employers with self-insured health coverage plans must file forms 1095-B and 1094-B.

Employers should be aware of several potential triggers of an ACA penalty. To start, failing to provide affordable, minimum-value coverage to eligible full-time employees and their dependents can trigger an IRS penalty. Additionally, offering coverage that doesn’t meet ACA guidelines and filing inaccurate 1095-C and 1094-C forms can trigger penalties. Lastly, if an employee receives subsidized health coverage through the Marketplace, employers may receive a penalty.

The highest income to qualify for the premium tax credit under the ACA is between 100 percent and 400 percent of the federal poverty level (FLP). In 2024, individuals who earn between $14,580 and $58,320 may qualify for the premium tax credit, while a family of four may qualify if their household income ranges between $30,000 and $120,000.

The Affordable Care Act is enforced by the Internal Revenue Service (IRS), which enforces the ACA’s employer mandate and reporting requirements. However, other entities, such as the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services, enforce other compliance requirements outlined in the ACA.