Understanding ACA Requirements for Large Employers

In the United States, Applicable Large Employers, also known as ALEs, are required by law to offer affordable and valuable health insurance to qualified employees under the Affordable Care Act (ACA). Understanding how to provide and disclose health care coverage is essential to ensuring compliance with the federal government and avoiding potential penalties.

What is the ACA?

The ACA is the comprehensive health care reform enacted in 2010 and signed into law by President Barack Obama. Its purpose is to expand access to affordable health care. Since its inception, the ACA has extended coverage to millions of previously uninsured Americans.

The ACA mandates that all Applicable Large Employers with 50 or more full-time equivalent employees offer health care coverage to qualified employees and their dependents. The coverage offered must meet both the minimum essential coverage (MEC) and minimum value (MV).

Reporting Requirements for ALE’s

To prove affordable and valuable coverage was offered to qualifying employees, employers must annually submit health insurance information to the IRS as part of the ACA’s employer-shared responsibility provisions (ESRP), also known as ‘employer mandates.’ To do this, employers must show proof of coverage offered to all full-time employees, evaluate all variable-hour employees based on hours worked, and offer coverage when and if they qualify. The ACA considers any employee working 30 or more hours per week as full-time.

As part of the reporting process, applicable large employers are required to fill out and submit forms 1094-C and 1095-C. Form 1094-C is the employer summary of health coverage information for all employees. Form 1095-C is the employee summary of health coverage for all employees considered full-time for one or more months during the calendar year.

Employers must file their ACA information on paper or electronically submit it to the IRS. However, under new regulations issued in 2023, ALEs may only choose the paper method if they have 10 or fewer 1095-C forms starting with the 2024 tax filing year. Previously, organizations could file up to 200 paper filings. The change was made to encourage electronic submissions. This year’s deadline for paper filing was February 28, 2024. The deadline for electronic filing with the IRS is April 1, 2024.

ALEs must also furnish or send a copy of Form 1095-C to all qualifying employees. The deadline to produce and distribute the forms to each employee has historically been January 31 each year. In 2023, the IRS made a permanent extension, moving the deadline to March 2, but in 2024, the deadline is March 1 due to the leap year.

Get Help with Your ACA Reporting

For employers, failing to meet the requirements explained above may result in a significant penalty from the IRS. Simply submitting your ACA information is not enough. The filings need to contain accurate information. If the information provided is inaccurate and corrections are needed, the IRS will begin the Taxpayer Identification Number (TIN) error reconciliation process.

Several factors can make managing ACA compliance more complex, such as the company’s size, turnover rates, and use of seasonal employees. Employers can handle ACA filing for their company through their Payroll department or can seek third-party assistance.

If your company needs help with ACA compliance, Employee Retention Solutions can track employee eligibility using our software, helping you avoid penalties by providing visibility to employee eligibility. ERS provides access to user-friendly online tools for efficient monitoring and timely alerts when employees reach eligibility. Our experts can also simplify your process by helping you fill out, submit, and distribute electronic forms 1094-C and 1095-C.

For timely support or if you have any questions, contact us at (585) 227-1300.