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IRS Releases Draft Instructions for Affordable Care Act ESR Reporting Requirements on Forms 1094-C and 1095-C

The IRS recently published this year's draft instructions for Forms 1094-C and 1095-C. Filing standards for 2017 are expected to be more rigid than in previous years, which is why you should make sure your business takes the necessary steps for to prepare.
ESR reporting
  • The IRS has released draft instructions for 2017 Forms 1094-C and 1095-C.
  • The information on these forms helps the IRS assess the adequacy and affordability of health coverage that applicable large employers offer to their full-time employees.
  • Although employers may have questioned this provision given the various complexities and uncertainties in its first few years, the reporting is required. Employers that don’t comply may be subject to penalties.
  • Preparation is key as 2017 filing standards are expected to be more rigid.


The IRS recently published 2017 draft instructions for Forms 1094-C and 1095-C. The information on these forms help the IRS assess the adequacy and affordability of employer-sponsored health coverage to full-time employees by applicable large employers, or ALEs. In addition, the forms include reporting on individuals covered under the employer plan for self-insured ALEs. An ALE is defined, in general, as an employer that employed 50 or more full-time employees, including full-time equivalent employees, in the previous calendar year.

ALEs are subject to the employer shared responsibility (ESR) provisions of the Affordable Care Act (ACA), including specific reporting requirements. ALEs risk a potential penalty if they do not offer adequate and affordable coverage to their full-time employees and their dependents, and at least one of their full-time employees receives a premium tax credit for purchasing insurance through a government Marketplace. They are also subject to penalties for inaccurate filing, late filing, or non-filing of Forms 1094-C and 1095-C.

What do the 2017 draft instructions include?

The draft instructions released earlier this month had minor changes from 2016, outside the expected removal of transition relief, which is no longer applicable in 2017. Although there could be changes prior to when the final forms and instructions are published, these draft forms give a reasonable indication of what is expected of 2017.

Changes from the 2016 instructions include:

  • Removal of all references to transition relief. No transition relief is available for 2017.
    • Form 1094-C, line 22, Box C is designated as “Reserved.”
    • Form 1094-C, Part III, column (e) is designated as “Reserved” and the entry rows in the column are shaded.
  • Furnishing and filing deadlines for 2017 forms:
    • Furnishing deadline for Forms 1095-C to employees: January 31, 2018
    • Paper filing deadline for Forms 1094-C and 1095-C to the IRS: February 28, 2018
    • Electronic filing deadline for Forms 1094-C and 1095-C to the IRS: April 2, 2018
  • Maximum penalty for late or non-filing/furnishing increases for inflationary adjustments.
  • There is a reference to de minimis errors but further clarity is necessary.

Despite previous uncertainties, compliance is required

These first years of ESR reporting have been particularly challenging due to both the complexity of the ACA itself, as well as some anticipation that this provision would change or be repealed altogether. The initial yearlong delay, a Supreme Court case challenging the validity of the ACA premium tax credits, and the most recent uncertainty around the possible repeal of the ACA all may have led some employers to be less-than-prepared for the ESR provisions. But as it stands, compliance with the ACA provisions is required, and significant preparation is necessary.

2017 filing standards expected to be more rigid than in previous years

For the first reporting years of 2015 and 2016, the IRS allowed a less rigid reporting standard, extending the furnishing and filing due dates and allowing for an out from penalties if the returns were filed on time but were incomplete and/or inaccurate, if good faith efforts were made by the employer.

As we move into 2017 filing where penalty relief is not expected, you should ensure that your business is prepared to meet the requirements as they stand for the ESR provisions. Even with this relief, many employers who did not complete their information accurately or completely in previous years will most likely be required to research, complete, and respond to IRS notices appropriately. It is generally much more challenging to fix errors than to file the information correctly.

What should businesses do to prepare?

With an end to transition relief and increasing penalties for non-compliance, businesses should take ample time to prepare, gather information, and properly furnish and file 2017 Forms 1094-C and 1095-C. Information from your payroll, HR, and benefits departments is key, although integrating your payroll with your benefits administration can help ease this burden.

Paychex will continue to monitor for the final forms as well as any developments that may impact employers concerning the employer shared responsibility provision.


laurie savage headshot
Laurie Savage is Senior Compliance professional, leading robust legislative research efforts analyzing intricate policy, including the Affordable Care Act (ACA), paid leave, tax reform and recently, legislation responding to the COVID-19 pandemic.
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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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