What You Need to Know
Several amendments to the ACA affordability threshold and reporting requirements of the
Affordable Care Act (ACA) will go into effect at the beginning of 2024 for the 2023 reporting year. Here is what you need to know.
The Reporting Requirements of the ACA
When the Affordable Care Act was implemented in 2010, it brought with it several responsibilities for businesses. The primary obligation is that if you are an Applicable Large Employer (ALE), you have to offer affordable health insurance to your full-time equivalent employees. In addition to the healthcare coverage obligation, ALEs are required to provide detailed information about the health insurance you offer your workforce by submitting Forms 1094-C and 1095-C to the IRS, as well as provide a copy to employees.
Recent Changes to ACA
A significant change applies to ALEs that submit a total of 10 or more forms. These businesses
are now required to file electronically for the calendar year 2023.
Earlier this year, the IRS lowered the affordability threshold for ACA plans from 9.61% to
9.12%. That means the lowest-cost health insurance plan you offer cannot cost more than
9.12% of an employee’s household income to be considered affordable.
What These Changes Mean for You
Let’s take a closer look at what exactly these amendments mean for your business:
- Lower affordability threshold: You need to review your health plans to determine
whether they meet the new ACA affordability requirement of 9.12%. If not, you should
make the necessary adjustments as soon as possible. - Phasing out of paper filing: Until now, you could file up to 250 paper returns before
hitting the electronic filing threshold. Now, that number has been reduced to just 10
paper returns. - Obligation to file electronically: If you are an ALE or a non-ALE entity with a self-insured
plan, you now have to transition to electronic filing for Forms 1094-C and 1095-C. - Subject to the “aggregation of returns” clause: This clause requires you to add-up the
total of all your returns—such as Forms W2 and 1099–to determine your electronic filing
requirement.
Who Needs to File ACA Reporting Forms?
These new requirements apply first and foremost to ALEs—businesses with 50 or more full-time
equivalent employees in the past calendar year. If you are an ALE, you have to adhere to the new
reporting regulations, regardless of the number of returns you submit.
However, if you submit fewer than 10 aggregate returns, you may still have the option of paper
filing.
It is also important to understand that some states also have specific requirements regarding
forms 1095-C and 1095-B that employers need to be aware of and adhere to.
Which Forms Do You Need to File?
The two forms you should use to report health insurance information are Forms 1094-C and
1095-C.
Form 1094-C
Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage
Information Returns, is the form you are required to submit that includes information about the
number of employees who take advantage of your health plan and how many Forms 1095-Cs
you are filing.
Form 1095-C
Use Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to report
information about each employee’s health insurance offer, including the type and potential cost, as well as their decision to accept or decline coverage.
If you are an ALE you should file this form for every employee who is offered the coverage and
those who worked 130+ hours in at least one month during the year, even though they are not
eligible for benefits.
Form 8508
If you are having difficulty filing out these forms electronically, you can request a waiver from
electronic filing. To do this, submit Form 8508, Application for a Waiver from Electronic Filing of
Information Returns, to the IRS.
When Are the Forms Due?
There are two deadlines to be aware of. Each employee should be provided a copy of their
1095-C by March 2, 2024. The deadline for submitting Forms 1094-C and 1095-C electronically to the IRS and any applicable States is March 31, 2024–irrespective of the total number of returns you file. For paper filers the deadline is February 28th, 2024.
Form 8508 should be submitted at least 45 days before March 31st, which is the middle of February at the latest.
Penalties if You Do Not File
If you do not comply with ACA reporting requirements, you will be subject to penalties. The
standard fine for failing to file the necessary forms is $290 for each return. However, if you miss
the March 31st deadline but still manage to file Forms 1094-C and 1095-C before April 30th, the
IRS will reduce the penalty to $50 per return.
Be Prepared
It is critical to proactively prepare for these changes to the ACA affordability threshold and
reporting requirements. Consult with your HR department and tax advisor to determine how
these amendments affect you. Pinpoint potential hurdles, as well as areas you should pay special attention to. Finally, it is advisable to research the best and most cost-effective way to
make changes to your health plan, as well as to file the forms. By preparing early, you can meet
the deadlines and avoid incurring any penalties.