Managing Affordable Care Act Reporting Requirements Due in 2025

Business owners need to understand the common terms used regarding the Affordable Care Act (ACA), how to make proper calculations, and how to follow their ACA reporting requirements.

ACA Reporting Deadlines: Important Dates for 2025

For calendar year 2024, an Applicable Large Employer (ALE) must furnish Form 1095-C to eligible employees by March 3, 2025. The ACA deadline for filing paper Forms 1094-C and 1095-C with the IRS is February 28, 2025. The due date for electronic filing is March 31, 2025. These are expected due dates. The IRS had not issued final due dates at the time this article was updated. The affordability rate for plan years beginning in 2025 is 9.02% (an increase from 8.39% for plan years beginning in 2024).

Businesses subject to ACA requirements for tracking and reporting have several deadlines to meet if they want to be in ACA compliance. There are deadlines for furnishing forms to employees and for filing forms to the IRS. The IRS permanently provided an automatic 30-day extension from the January 31 due date for ALEs to provide forms 1095-C to applicable employees, which means no additional extensions are available.

The deadline for ACA filing of all paper forms with the IRS remains February 28. However, the deadline is March 31 if filing electronically. The due date is the next business day if it falls on a weekend or legal holiday. It should be noted that all employers that file a combined total of 10 or more information returns, including Forms 1094-C and 1095-C, must file the forms electronically.

Who Is Required To Report Under the Affordable Care Act?

Applicable large employers (ALEs) are required to report under the Affordable Care Act. This includes filing specific forms with the IRS to document the health coverage offered to full-time employees. ALEs must also provide copies of these forms to their employees to ensure transparency and compliance with ACA regulations.

What Is an Applicable Large Employer?

An applicable large employer (ALE) has an average of 50 or more full-time employees, including full-time equivalent employees (FTEs), during the prior year. This ALE definition is crucial since only ALEs are subject to the ACA's Employer Shared Responsibility (ESR) provisions.

If your business qualifies as an ALE, you must offer affordable health insurance to your full-time employees and fulfill applicable ACA reporting requirements.

What Are the ACA Reporting Requirements for Employers?

ACA requirements for employers that meet the threshold to be considered an ALE include submitting all the proper forms under the ACA. Failure to do so could result in potential penalties each year.

Calculating Full-Time Equivalents for ACA Reporting

To calculate your full-time equivalents, add the hours of service for all employees who worked less than an average of 30 hours a week or 130 hours a month in a given month. Count no more than 120 hours per employee per month.

Then, divide the total hours by 120 to get your FTE count for that month. This number is then added to the number of regular full-time employees for each month. The total number of full-time employees, including full-time equivalents for each month in the preceding calendar year divided by 12 determines whether a business is an ALE subject to employer shared responsibility (ESR) provisions.

ACA Reporting Requirements and Health Coverage Offered to Employees

To fulfill their ACA compliance, employers that meet the ALE threshold must offer adequate and affordable health insurance coverage to full-time employees and their dependents or risk an assessment if at least one full-time employee purchases health insurance coverage from a government marketplace and receives a premium tax credit.

ALEs must complete Forms 1094-C and 1095-C to report information about health insurance coverage offered to full-time employees and their dependents.

The ACA also provides specifics on what constitutes adequate, affordable coverage. The ACA defines affordable coverage as costing the employee no more than 9.5% of the employee's household income for the lowest cost, self-only minimum essential coverage. However, this percentage is adjusted for inflation each year and is 9.02% for plan years beginning in 2025.

Plans must also meet a minimum value (MV) threshold—that is, they must cover at least 60% of the total allowed cost of benefits under the plan.

How To Determine Affordability

Recognizing that it is difficult for employers to know their employees' household incomes, the U.S. Department of Treasury provided the following 3 safe harbors in the ESR final regulations that can be used to assess the affordability of an offer of coverage in lieu of using household income.

• W-2 Safe Harbor: An ALE's offer of coverage for every month of a calendar year is considered affordable if the employee's required contribution for the lowest cost, self-only coverage that provides MV for the calendar year does not exceed 9.5% (as adjusted each year) of the wages paid to the employee by the employer as reported in Box 1 of the Form W-2. Special rules apply for partial years of employment.
• Rate of Pay Safe Harbor: An ALE's offer of coverage for a calendar month is affordable if the employee's monthly required contribution for the lowest cost, self-only coverage that provides MV does not exceed 9.5% (as adjusted) of an amount equal to 130 hours multiplied by the lower of the employee's hourly rate of pay as of the first day of the coverage period or the employee's lowest hourly rate of pay during the month for an hourly employee, or of the employee's monthly salary for a non-hourly employee.
• Federal Poverty Line Safe Harbor: An ALE's offer of coverage for a calendar month is affordable if the employee's required contribution for the calendar month for the lowest cost, self-only coverage that provides MV does not exceed 9.5% (as adjusted) of the federal poverty line for a single individual for the calendar year divided by 12.

Example: An ALE offers coverage to full-time employees and their dependents. The employee monthly share of the lowest cost, self-only coverage is $200.

• Discount: If the plan has a $50 per month premium discount for individuals who receive the COVID-19 vaccine under a wellness program, the premium discount is disregarded when determining the employee's required contribution, regardless of whether the employee received the vaccine. The employee's required contribution per month is $200 for ESR purposes. Whereas, if the discount is related to a tobacco cessation program, the employee's required contribution would be $150.
• Surcharge: If the plan has a $50 per month premium surcharge for individuals not receiving the vaccine, the surcharge is added to the employee's required contribution regardless of whether an employee gets the vaccine. The employee's required contribution is $250 (200 + 50) monthly for ESR purposes. If the surcharge is related to a tobacco cessation program, the employee's required contribution would be $200 for ESR purposes.

Additionally, if an employer offers a payment to an employee instead of enrolling in the employer's health insurance plan, this opt-out payment impacts the affordability calculation. For ESR purposes, the guidance provides:

• Unconditional opt-out payments increase an employee's required contribution by the payment amount.
• Conditional opt-out payments do NOT increase an employee's required contribution by the amount of an opt-out payment.

Similarly, employer contributions to a Health Reimbursement Arrangement (HRA) and health flex credits under the Section 125 cafeteria plan may impact an employee's required contribution as follows:

• HRAs: The employee's required contribution is generally reduced by the employer's contribution to HRAs as long as the employee may use the amounts to pay premiums for an eligible employer-sponsored plan, cost-sharing, and/or health benefits not covered by the plan. The HRA must be integrated with an employer-sponsored health plan.
• Health Flex credits: The employee's required contribution is reduced by the amount of the employer's contribution to health flex credits only if the employee is limited in using the amount for health insurance coverage or medical care expenses as defined under Internal Revenue Code §213.

Assessments for Failure To Offer Affordable and Adequate Health Insurance

If an ALE does not offer minimum essential coverage (MEC) to at least 95% of its full-time employees and their dependents, the employer risks being assessed one type of employer-shared responsibility payment (ESRP) if at least one full-time employee purchases health insurance in a government marketplace and receives a premium tax credit. The payment is $2,000 per full-time employee (adjusted annually for inflation) after excluding the first 30 full-time employees. This is a 4980H(a) assessment.

There is also a 4980H(b) assessment, which is applied if the ALE offers coverage to 95% of its full-time employees but the coverage offered does not meet the minimum value and affordability stipulations listed above. This penalty is $3,000 per employee (adjusted each year for inflation) who received the premium tax credit provided by the IRS for individuals without access to affordable coverage.

Gathering and Submitting Data To Meet ACA Reporting Requirements

Each year, ALEs subject to ACA reporting requirements must compile data on applicable employees and submit this information to the IRS. Attention to detail with all forms and ACA rules for employers is vital since any missteps, inaccuracies, or delays in processing can result in penalties and interest.

Required ACA Forms for Reporting: Forms 1095-C and 1094-C

The first reporting requirement for ALEs is to provide a copy of Form 1095-C to every full-time employee, regardless of whether they enrolled in the company-sponsored health plan. Employers must also keep a copy of every 1095-C form to send to the IRS to fulfill ACA reporting requirements. Correctly filling out lines 14 through 16 on this form can be particularly challenging for many people.

Employers must also complete Form 1094-C, which acts as a summary for the aggregated 1095-C forms and provides helpful information to the IRS, including contact information and the employer's Employer Identification Number (EIN), the name of a contact person, and the total number of employees.

Preparing for ACA Year-End Reporting

Part of a solid preparation plan involves gathering the data needed to complete the required IRS forms in time for ACA year-end reporting. An ALE will need a variety of information, including but not limited to:

• Employer Identification Number and business contact information
• Key contact person within the company and that individual's contact information
• Total number of employees each month
• Total number of full-time employees each month
• Average hours worked by each employee each month
• Whether insurance was offered to each full-time employee
• The type of insurance coverage offered (if applicable)
• Monthly cost to each employee for the lowest-cost, self-only minimum essential coverage providing minimum value that is offered
• Individual employee names and Social Security numbers
• Proof that 95% or more of full-time employees and their dependents were offered minimum essential coverage

Submitting Your Required ACA Forms to the IRS

Once the employer completes the required forms with the proper information, they should prepare them for transmission to the IRS. As with traditional business tax returns, ACA reporting forms can be submitted electronically or via regular mail.

However, employers with 10 or more information returns, which includes Forms 1095-C, are required to submit all forms electronically.

Prepare for ACA Year-End Reporting in Advance

Verifying, cataloging, and reporting accurate data takes considerable time. Starting the process early helps avoid an unnecessary last-minute rush to gather information and costly late fees and penalties due to inaccuracies. Beginning in the third or fourth quarter of the previous calendar year, employers should start verifying employee records with each employee to ensure that all personnel data is accurate and current. Employers should also cross-reference facts such as employee hire dates and average hours worked if employees are newly eligible for benefits.

Simplify ACA Compliance Through Outsourcing

Reporting can be difficult and costly. An integrated solution that combines benefits, payroll, and insurance data can relieve much of the burden at reporting time.

An ACA reporting service such as the Paychex Employer Shared Responsibility Services monitors your ALE status, FTE hours, and the type and affordability of your offered coverage throughout the year.* You can also receive help with end-of-year reporting, including lines 14, 15, and 16 of Form 1095-C for each employee.