ACA Reporting

ACA Reporting Requirements

Under the ACA, certain employers and insurance providers must report health coverage information to the IRS.

Here are the key points:

1. Who Needs to Report:
   • ALEs: Employers with 50 or more full-time employees, including full-time equivalents.
   • Insurance Providers: Health insurance issuers, self-insured employers, government agencies, and other providers of minimum essential coverage.
2. Forms to Use:
   • Form 1095-C: Used by ALEs to report information about offers of health coverage and enrollment in coverage for their employees.
   • Form 1095-B: Used by insurance providers to report information about individuals who are covered by minimum essential coverage.
3. Deadlines:
   • Employee Statements: In California, employers must provide to employees by January 31. In Colorado, Florida, Minnesota, Oklahoma and Texas employers must provide to employees by March 3.
   • IRS Filing: Paper filings are due by February 28, and electronic filings are due by March 31.
4. Penalties:
   • Failure to file correct information returns or provide correct payee statements may Non-compliance with ACA reporting requirements can result in significant penalties. Here are the main types of penalties:
     • Failure to File Correct Information Returns (Forms 1094-C and 1095-C):
       • Penalty Amount: Up to $310 per return in 2026
     • Failure to Provide Correct Payee statements:
       • Penalty Amount: Similar to the failure to file, this can also result in a $310 penalty per statement.
     • Combined Maximum penalty:
       • Up to $620 per employee, with annual caps depending on company size and intent (e.g., reasonable cause vs. intentional disregard).
     • Employer-Shared Responsibility Payment (ESRP):
       • 4980H(a) penalty: For not offering minimum essential coverage to at least 95% of full-time employees and their dependents.

The penalty for 2026 is $3,340 per employee (excluding the first 30 employees).

For the 2025 calendar year, the adjusted penalty amount under Code § 4980H(a) is $2,900 per full-time employee (less the 30-employee reduction).

• 4980H(b) penalty: For offering coverage that is either unaffordable or does not provide minimum value, and one employee receives a premium tax credit.

The penalty for 2026 is $5,010 per affected employee.

For the 2025 calendar year, the adjusted penalty amount under Code § 4980H(b) is $4,350 per full-time employee who receives subsidized coverage through an exchange.

These penalties can add up quickly, especially for larger employers, so it’s crucial to ensure compliance with ACA reporting requirements. See the recording of our presentation on this subject here.

Warner vendor partners can provide great assistance for ALEs who need help with this process.

We are here to help you with any compliance questions you have.

Purpose of Measurement Periods

Measurement periods are used by employers to determine which employees are considered full-time under the ACA. This is important because the ACA requires Applicable Large Employers (ALEs) to offer health insurance to full-time employees (those working an average of at least 30 hours per week) and their dependents, or face potential penalties¹. (Opens in a new window)

For workers who have fluctuating hours, determining full-time status can be challenging. For these employers, using the look-back method for measuring full-time status can ensure that full-time employee counts are correct and that coverage is offered to the correct group of employees.

1. Look-Back Measurement Method:
   • How It Works: Employers use a defined period (the measurement period) to track and average an employee’s hours of service to determine their full-time status for a subsequent stability period.
   • Pros: Provides more stability and predictability for employees with variable hours.
   • Cons: More complex to administer². (Opens in a new window)

Components of the Look-Back Measurement Method

1. Measurement Period:
   • Definition: A period of time (between 3 to 12 months) during which an employer tracks an employee’s hours to determine if they average at least 30 hours per week.
   • Types:
     • Initial Measurement Period: Used for new hires.
     • Standard Measurement Period: Used for ongoing employees³. (Opens in a new window)
2. Administrative Period:
   • Definition: A short period (up to 90 days) after the measurement period, during which the employer can analyze the data and notify employees of their status.
   • Purpose: Allows time for administrative tasks without affecting the stability period². (Opens in a new window)
3. Stability Period:
   
   • Definition: A period (at least 6 months and no shorter than the measurement period) during which employees who were determined to be full-time during the measurement period must be treated as full-time, regardless of their actual hours worked.
   • Purpose: Provides consistency and predictability for both employers and employees³. (Opens in a new window)

Benefits of Using Measurement Periods

• Predictability: Helps employers manage and predict their health insurance obligations.
• Flexibility: Allows employers to accommodate employees with variable work schedules.
• Compliance: Ensures that employers meet ACA requirements and avoid penalties¹.

Conclusion

Measurement periods are essential for ACA compliance, helping employers determine which employees qualify as full-time and ensuring that they offer the necessary health coverage. For employers with employees who work variable hours or who have high turnover, a measurement period ensures accuracy and ensures that an employer is offering coverage only to actual full-time employees. By using either the monthly measurement method or the look-back measurement method, employers can effectively manage their workforce and meet their legal obligations.