Purpose of ACA Employer Reporting
At the end of each calendar year, Applicable Large Employers (ALEs) must report information to the IRS about the health coverage they offered – or did not offer – to any employee who was full-time for at least one calendar month during that year.
This reporting serves two major functions:
- Employer Mandate Compliance: The IRS uses employer reporting to determine whether an ALE met its obligations under the ACA employer mandate.
- Premium Tax Credit Eligibility: The data informs state exchanges and the IRS about employees’ eligibility for Premium Tax Credits (PTCs). If an employee was offered affordable, minimum-value coverage, they’re generally ineligible for federal PTCs.
Employers must report offers of coverage, not actual enrollment, based on the lowest-cost minimum essential coverage (MEC) plan at the employee-only rate. Employees may choose to enroll in richer coverage, but affordability calculations are made on that lowest-cost baseline.
When applying for exchange coverage, employees self-report whether they were offered employer coverage. If an employee waives an affordable offer of MEC/MV coverage, the employer reports this using the appropriate safe harbor code. The IRS matches these records to determine both employer compliance and employee PTC eligibility.
Additionally, carriers and employers (of all sizes) with self-funded and level-funded plans have separate reporting obligations to document actual coverage maintained, which supports both federal and state individual mandate enforcement.
Reporting Forms Overview
There are two core IRS forms used by ALEs for ACA reporting:
- IRS Form 1094-C: Employer-level transmittal. This includes company information, counts of submitted forms, certificates of eligibility (offer methods, etc.), affiliated companies within controlled groups, and full-time employee counts. One 1094-C is filed per ALE. It serves as the employer’s preliminary information sheet and accompanies the submission of all Forms 1095-C.
- IRS Form 1095-C: Employee-level reporting. One form must be completed for each individual employed full-time for at least one calendar month during the reporting year. The form details the coverage offered by the ALE, the employee’s required contribution toward the lowest-cost self-only plan providing minimum value, and the applicable indicator codes, which show whether the employee elected or waived coverage – and if waived, which affordability safe harbor was used to determine affordability.
Other entities also file related forms:
- 1095-A: State exchanges (e.g., Covered California, Nevada Health Link, etc.).
- 1095-B: Insurance carriers and non-ALE self-funded or level-funded employers.
- 1095-C: ALEs (fully insured and self-funded).
Reporting Deadlines
The table below summarizes the key deadlines for furnishing employee copies and filing with the IRS.
| Who Reports | Forms | Employee Copies (Form 1095 Only) | IRS Electronic Filing |
|---|---|---|---|
| Carriers & Non-ALE Self-Funded (or Level-Funded) Employers | 1094-B / 1095-B | March 2 | On/before March 31 |
| Applicable Large Employers (ALEs) | 1094-C / 1095-C | March 2 | On/before March 31 |
Key timing notes:
- The employee distribution deadline is fixed annually at March 2 (or the next business day if it falls on a weekend).
- Employers filing 10 or more information returns (W-2s, 1099s, 1094/1095, etc.) must file electronically.
- Electronic returns must be filed with the IRS by the last day of March. Paper submissions are otherwise due to the IRS by the end of February each year.
Electronic filings must be transmitted through the IRS Affordable Care Act Information Returns (AIR) system. This system requires advance setup and testing, so many employers work with payroll vendors or third-party reporting providers to complete the process. Registration and set up with the AIR system can take several weeks.
Penalties for Reporting Failures
The IRS assesses separate penalties for failure to file returns with the IRS and failure to furnish employee copies. Penalties apply per form, so they can add up quickly.
Intentional disregard carries no cap and is applied aggressively by the IRS in cases of non-compliance.
If you fail to file a correct information return by the due date and cannot show reasonable cause, you may be subject to penalties. This includes filing late, failing to include all required information, providing incorrect information, filing on paper when electronic filing is required, or reporting incorrect or missing TINs.
| Penalty Type | Up to 30 Days Late | 31 Days Late - Aug 1 | After Aug 1 or not filed | Intentional Disregard |
|---|---|---|---|---|
| Per Return | $60 | $130 | $340 | $660 |
| Maximum (≤ $5M receipts) | $239,000 | $683,000 | $1,366,000 | No limit |
| Maximum (> $5M receipts) | $683,000 | $2,049,000 | $4,098,500 | No limit |
Note: The penalty amounts listed above are current as of 2025. These amounts are adjusted annually for inflation. For the most up-to-date figures, refer to the IRS General Instructions for Information Returns.
Practical Tips for Employers
- Start early: Gather eligibility and offer data throughout the year to avoid scrambling during reporting season.
- Align payroll, HRIS, and carrier data: Mismatches between systems are the biggest cause of filing delays.
- Document safe harbor usage: Whether you use W-2, Rate of Pay, or FPL safe harbor, keep clear records.
- Include reporting details in plan documents: Employers should describe ACA reporting practices, including safe harbor methodology, in their ERISA plan documents and SPD.