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Navigating the Affordable Care Act’s (ACA) reporting process is complex, even for the most seasoned employers. Avoiding common pitfalls is essential to ensure compliance and prevent costly penalties. Here are some tips for preventing common reporting mistakes.
Verify Legal Company Name Matches EIN
Employers should ensure that their company's legal name matches the Employer Identification Number (EIN) on all forms to avoid IRS penalties. Employers should resolve any discrepancies before filing.
Ensure Proper Aggregation of ALEs
Each applicable large employer (ALE) member in an Aggregated ALE Group must file Forms 1094-C and 1095-C with the IRS and provide Form 1095-C to its full-time employees using its own EIN, even if it has fewer than 50 full-time employees. If the group averages 50 or more full-time employees, it is considered an ALE, and each employer is an ALE member.
Companies with fewer than 50 full-time employees often overlook reporting obligations if they are part of an Aggregated ALE Group, risking penalties. Also, any mergers or acquisitions during the year must also be accurately reported.
Accurately Track Employee Status
Accurately identifying full-time employees is crucial for ACA compliance. A full-time employee works at least 30 hours per week or 130 hours per month. ALEs must adhere to the IRS definition, regardless of their internal policies, and report coverage monthly. Employers can use either the monthly or look-back measurement methods to track status. Incorrect tracking can lead to coverage and reporting errors.
Correctly Report Offers of Coverage
Form 1095-C is crucial for ALEs to report accurately, especially understanding lines 14-16 which cover the offer of coverage, employee required contribution and safe harbor codes. For fully insured plans, complete a form for each full-time employee, even without coverage. For self-funded plans, a form must be completed for anyone covered.
Ensure Timely Reporting
Electronic IRS returns for 2024 must be filed by March 31, 2025. Paper returns must be filed by February 28, 2025, with a limit of 10 paper filings.
New filing rules mean that Forms 1095-B and 1095-C are only sent upon request. To use this method, employers must post a notice on your website by March 3, 2025, including contact details, and keep it up until October 15, 2025. If an employer is not posting online, they must provide statements to individuals by March 3, 2025.
Follow Applicable State Reporting Requirements
Employers in California, the District of Columbia, Massachusetts, New Jersey, and Rhode Island must meet state reporting requirements in addition to federal ones. While Vermont has an individual mandate, it lacks separate state reporting requirements. It's essential for employers to stay updated on federal changes, as these can affect state compliance.
Download the bulletin for more details.
Additional Resources
- IRS Q&As on Section 6055 reporting and on Section 6056 reporting, as well as a separate set of Q&As on Forms 1094-C and 1095-C
- Forms 1094-B and 1095-B (and related instructions) for use to report under Section 6055
- Forms 1094-C and 1095-C (and related instructions) for use to report under Section 6056
