Legal and Regulations

Understanding payroll taxes: Affordable Care Act (ACA) reporting

Complying with the ACA is an important part of reporting to the IRS.

Published: January 18, 2017

An important responsibility for many employers is to comply with the Affordable Care Act (ACA) requirements for reporting on health insurance coverage provided to employees. Below is some key information to help you get started from the Internal Revenue Service.

What is it?

ACA mandates that Applicable Large Employers (ALE) must report to the IRS information about the health care coverage, if any, offered to their full-time employees. The IRS will use this information to administer the employer-shared responsibility provisions and the premium tax credit. Employers must use Form 1094 and Form 1095 to report information to the IRS about their full-time employees.

Additionally, employers must provide a copy of Form 1095 to each full-time employee, which includes the same information provided to the IRS.

Who is required to report?

ACA reporting is required if your business meets any of the following criteria:

  • You are an ALE with 50 or more full-time employees or full-time equivalents (FTEs)—and are fully-insured (have an insurance carrier plan) or self-insured (have a self-funded health plan). This includes nonprofit organizations and government entities.

  • You have multiple businesses with a combined total of 50 or more full-time employees or FTEs (aggregated companies).

  • You are self-insured, with any number of full-time employees and FTEs.

What information do you need to report?

ACA reporting provisions require the following information:

  • Employee name, Social Security number, and address

  • Employer business name, employer tax ID (EIN), and business address

  • Certification by calendar month of your offer of Minimum Essential Coverage (MEC)

  • Employee’s share of the lowest cost monthly premium

  • Number of full-time employees by month

  • The months for which each employee was enrolled in coverage

Which IRS forms must be filed?

  • Form 1094: An ALE must file transmittal Form 1094 for all of the returns filed for a given calendar year. This form must be filed regardless of whether the ALE offered health insurance coverage, or if their employees enrolled in any coverage offered.

  • Form 1095: An ALE must file a separate Form 1095 for each of its full-time employees. The forms must be filed regardless of whether the ALE offered coverage or employees enrolled in any coverage offered.

When do you need to file?

  • IRS filing: Forms 1094/1095 must be filed by March 31, 2017, reporting for the 2016 calendar year. IRS encourages electronic filing.

  • Employee reporting: Form 1095 must be given to employees by March 2, 2017.

What happens if you don’t report?

Depending on the size of your business, the IRS may charge penalties ranging from $100 per return to a maximum of $3 million during a calendar year for missed or incorrect returns or payee statements.

You may find it easier and more efficient to work with a payroll provider or specialist that can handle ACA reporting on your behalf. Explore your needs and learn more about your payroll requirements.