Employers that were considered “Applicable Large Employers (ALEs)” in 2023 must file IRS reports by April 1, 2024, detailing their compliance with the ACA’s employer mandate. ALEs must generate a report for each person employed full time for at least one full calendar month of 2023. Additionally, ALEs must furnish copies of these reports to their employees on or before March 1, 2024.
Similarly, health insurance plans and health insurance exchanges, including Covered California, Nevada Health Link, and others, must also produce ACA IRS reports, detailing coverage maintained by enrollees.
What are ALEs?
ALEs are employers subject to the ACA’s employer mandate. They are required to offer their full-time eligible employees (and their dependents) affordable minimum value health benefits, and report such offers to the IRS at the conclusion of the calendar year.
ALEs average 50 or more full-time (FT) and Full Time Equivalent (FTE) employees, as of 1/1 annually, according to the average size of their workforce in the preceding calendar year. Employers considered ALEs in 2023 made their compliance calculations in January 2023, by evaluating their 2022 workforce size. Now that the 2023 calendar year is complete, those 2023 ALEs must report on their 2023 compliance efforts.
Separately, employers must redetermine their ALE status for 2024 by evaluating the average size of their workforces in 2023. Refer to our previous compliance column for more information about determining ALE status in 2024: Annual Employee Benefits Compliance Responsibilities on January 1st.
Purpose of ACA IRS Reporting
The ACA requires most Americans to have Minimum Essential Coverage (MEC) health insurance (under the “individual mandate”), though there is a $0.00 non-compliance penalty at the federal level. A handful of states, including California (but not Nevada), have implemented their own statewide individual mandates that are enforced with non-compliance state tax penalties.
The ACA’s employer mandate requires ALEs to offer affordable health insurance coverage to their full-time employees and dependents, so they have a pathway to obtain group health coverage to satisfy their obligations under the individual mandate. ACA employer reporting allows the federal government to enforce employers’ compliance with the employer mandate, to ensure complaint offers of coverage are made.
Separately, health plans report on coverage maintained/elected by Americans, so the individual mandate can be enforced (again, there is no federal non-compliance penalty). However, health plans covering Californians must also submit their ACA IRS reports to the California Franchise Tax Board, so the California individual mandate can be enforced (with penalty). Other states with their own state mandates have similar requirements.
ALEs with fully insured plans must only submit their forms to IRS. However, employers with self-funded plans, of all sizes, must also submit their reporting forms to the California Franchise Tax Board.
Overview of ACA IRS Forms
ALEs are required to submit IRS Form 1094-C and IRS Forms 1095-C for all persons employed full time for at least one calendar month of the reporting year.
IRS Form 1094-C contains company information, which tells the IRS who the submitting ALE is, how many 1095-C reports it is submitting, certificates of eligibility, affiliated employees (common ownership and “controlled group” information), employee count, etc.
IRS Form 1095-C contains employee information, related to the coverage offered by the ALE. It includes the employee’s required contribution for the lowest-cost ACA compliant health plan offered by the ALE (at the employee-only rate), the ACA affordability safe harbor, and other important information.
Health plans and Health Insurance Exchanges (Covered California, Nevada Health Link, etc.) use Form 1095-A or 1095-B to report on coverage maintained by the taxpayer. There are three versions of IRS Form 1095, and forms must be filed with IRS and copies must be furnished to the taxpayer whose information is reported.
Most taxpayers receive multiple Forms 1095 from different entities:
- IRS Form 1095-A is used by state exchanges to document possession of minimum essential coverage (MEC) to the IRS as part of the ACA’s individual mandate. Anyone covered by an individual or family plan from the state exchanges will receive this form.
- IRS Form 1095-B is used by health insurance carriers/health plans (and non-ALEs with self-funded plans); it documents taxpayers’ possessions of MEC to the IRS. This form tells the IRS what coverage was elected and held by the taxpayer. Anyone enrolled in health coverage will receive this form or will have access to it by requesting it from the insurance carrier or health plan. In California, these forms are also submitted to the California Franchise Tax Board to enforce California’s individual mandate.
- IRS Form 1095-C is used by ALEs, with both fully insured and self-funded plans. It demonstrates the ALE’s compliance with the employer mandate, and reports on coverage offered to employees. For self-funded employers, additional reporting is required to document possession of MEC health coverage to the IRS for enforcement of the ACA’s individual mandate. In California, these forms from ALEs with self-funded plans only are also submitted to the California Franchise Tax Board to enforce California’s individual mandate.
ACA IRS Reporting Due Dates
Copies of forms 1095-C and 1095-B must be furnished to employees/covered subscribers by March 1, 2024. Forms 1094-B and 1094-C are not furnished to employees; they are filed only.
Forms 1094-C and 1095-C must now be filed electronically with the IRS on or before April 1, 2024. ALEs should work with their payroll providers and/or tax counsel to make these submissions electronically; most will not have the proper network abilities to submit these directly to IRS.
ACA IRS Reporting – Non-compliance Penalties
ALEs and plans that do not file as required by the ACA are subject to reporting noncompliance penalties, in addition to potential noncompliance penalties for violations of the ACA’s employer mandate. An employer can be penalized for not submitting forms to the IRS, and for not remitting copies of forms to covered individuals – making the reporting penalties effectively double.
For forms submitted not more than 30 days late, the penalty is $60/form. For forms submitted more than 31 days late but before August 1, 2024, the penalty is $120/form. For forms submitted after August 1st, the penalty is $310/form. For intentional disregard, the penalty is $630/form – and there is no limitation on the maximum penalty amount. Otherwise, non-compliance penalties are capped between $220,500 and $3,783,000 per employer, depending on the size of the employer and the tardiness of the forms’ submission.
The IRS may impose fines of up to $310/form upon ALEs that submit ACA IRS forms with incomplete or inaccurate information. ALEs working with third-party vendors to facilitate ACA reporting should review their forms for accuracy before submitting them to the IRS to avoid such penalty.
Additional Support
Word & Brown General Agency annually conducts an online webinar series to help insurance brokers and their ALE clients better understand their reporting obligations. Refer to Word & Brown’s ACA IRS Reporting website for more information. Additional ACA compliance information is available on the WBCompliance Wiki page.