ACA Reporting: A Primer

This article is a brief primer on employer reporting requirements for the Affordable Care Act.

OVERVIEW

The Patient Protection and Affordable Care Act, more commonly referred to as the Affordable Care Act (ACA) was signed into law by President Obama on March 23, 2010.

The act, which strives to ensure that all individuals have some form of health care coverage, requires employers to file annual returns with the IRS and provide statements to employees regarding available healthcare plan coverage. 

The ACA Reporting Wizard compiles data from your Benefits Administration site, and flags potential issues to prepare these forms for filing and distribution. Once the wizard is completed, forms are made available electronically for your employees, and relevant forms are filed with the IRS. You must complete this process for each FEIN.

This article is a brief primer on employer reporting requirements for the Affordable Care Act. We strongly recommend reading our resources in the Comply Database and on the IRS website for a more comprehensive guide. The information in this article is meant to introduce ACA concepts - any decisions regarding reporting and filing should be done in partnership with your Managed Benefits team or third-party broker.

WHO NEEDS TO FILE?

Employers with fifty or more full-time employees (or Full-Time Equivalent employees) qualify as Applicable Large Employers (ALEs) and are required to file the following forms to confirm adequate healthcare coverage is being provided to employees:

  • 1095-B - This form is filed by your insurance company, unless you are self-insured, and is provided to employees as proof of coverage. Form 1094-B is a version of this form sent to the IRS.

  • 1095-C - This form is provided to employees and documents any applicable offer of health coverage. This form is issued by employers with fifty or more full time employees (including FTEs) to employees. Form 1094-C is a version of this form sent to the IRS.

  • Certain states also have specific filing requirements and deadlines.

The IRS provides guidance on identifying full time employees and on determining if an employer is an ALE. We recommend consulting with your Managed Benefits team or third-party broker to determine if you need to file ACA reports with the IRS.

For additional details on the Affordable Care Act and its requirements, read our resources in our Comply Database and on the IRS website.  

WHAT COVERAGE MUST BE OFFERED?

Employers must provide what the IRS describes as Minimum Essential Coverage that has Minimum Value and is Affordable. The IRS defines these terms as follows: 

  • Minimum Essential Coverage - Government sponsored programs, eligible employer sponsored programs, plans in the individual market and grandfathered health plans in effect when the ACA was passed in 2010.

  • Minimum Value - The plan's share of the total allowed costs of benefits provided under the plan is at least 60% of such costs.

  • Affordable - Theemployee's required contribution with respect to the plan may not exceed 9.5 percent of the applicable taxpayer's household income.

The above definitions simply summarize the above terms - for detailed information on coverage that must be offered, refer to the IRS website. 

PENALTIES FOR NON-COMPLIANCE

Employers who fail to file comply with IRS requirements are subject to penalties, including: 

  • Failure to File Penalty - IRC 6721 - If returns are not filed by the late filing deadline, a penalty is assessed per individual return not filed.

  • Failure to Furnish Penalty - IRC 6722 - If healthcare information is not provided to employees by the IRS deadlines, penalties are assessed per individual who should have received the information. 

  • Employer Mandate Penalties - Penalties are assessed on employers for not offering coverage deemed adequate by the IRS. 

We recommend reviewing Healthcare.gov for information on ACA penalties. Consulting with your Managed Benefits team or third-party broker will help you stay compliant.