ACA Reporting Requirements: A Step-by-Step Checklist

The Affordable Care Act (ACA), enacted in 2010, requires certain employers to report information about health care coverage offered to employees. These reporting obligations are intended to ensure employers meet the ACA’s employer-shared responsibility provisions.

This mandate is required for all Applicable Large Employers (ALEs) which the US Office of Personnel Management defines as “an employer with an average of at least 50 full-time employees. An applicable large employer may be a single entity or may consist of a group of related entities. If there is a group of related entities, these are referred to as ALE members.”

Form 1094-C vs. 1095-C: Explanation of key forms for ALEs

Form 1094-C and Form 1095-C are two important forms that ALEs must file to comply with the ACA reporting requirements. Here's an explanation of the key differences between these forms:

Form 1094-C

Form 1094-C is often referred to as the "cover sheet" or transmittal form that accompanies Form 1095-C submissions to the IRS. Key aspects of Form 1094-C include:

• A summary of the information from all the 1095-C forms an employer is submitting
• Details about the organization, such as the Employer Identification Number (EIN), address, and contact information
• Total number of Form 1095-Cs being submitted
• Information on the number of full-time employees and total employees
• Certifications of eligibility regarding the health insurance offered for the reporting year

Form 1095-C

Form 1095-C is more detailed and is filed for each individual full-time employee. Key aspects of Form 1095-C include:

• Information about the health insurance coverage offered to individual full-time employees
• Lowest-cost premium available to the employee (9.12% of their income for 2024)
• Months of the year when coverage was available

See also: Differences Between Forms 1095-A, B, and C

Key reporting deadlines

Form 1095-C is distributed to both the IRS and the employees, whereas Form 1094-C is solely submitted to the IRS.

• March 31: Deadline for electronic filing with the IRS
• January 31: Deadline for distributing Form 1095-C to employees

Who must file?

Employers classified as ALEs, defined as businesses with 50 or more full-time employees (including full-time equivalent employees), are required to file ACA forms. This includes ensuring healthcare coverage is offered to employees and their dependents.

Requirements and benefits for small employers (under 50 employees)

Reporting requirements for small employers

Employers with fewer than 50 full-time employees, including full-time equivalent (FTE) employees, are not considered ALES and are not subject to the ACA’s employer mandate to provide health coverage or report on health care coverage offered.

However, small employers may still have obligations under the ACA if they choose to provide health insurance to their employees.

Benefits for small employers under the ACA

While small employers are not required to provide health coverage, the ACA offers benefits that can make it easier and more affordable for them to do so:

• Small Business Health Options Program (SHOP): This program allows small businesses with fewer than 50 full-time employees to access health insurance plans for their employees. Employers who use SHOP may qualify for the Small Business Health Care Tax Credit, which can cover up to 50% of the employer’s premium costs
• Flexibility in plan offerings: Small employers have more leeway in choosing health plans that fit their budget and employee needs

Voluntary reporting

If small employers decide to provide health coverage, they can voluntarily report this coverage to employees using Form 1095-B. While not required, doing so can help employees document their health coverage when filing taxes.

For more details on the SHOP program (health insurance for small businesses) and the available tax credits, refer to HealthCare.gov's SHOP Information.

Step-by-step checklist for ACA compliance

Step 1: Confirm ALE status

To determine if your company qualifies as an ALE:

• Calculate the number of full-time employees, including full-time equivalent (FTE) employees. An employee working 30 or more hours per week is considered full-time
• This means if you employ 45 full-time employees, plus 10 part-time employees working 15 hours each, you would still be required, as an ALE, to file 1094-C and 1095-C forms

Step 2: Gather employee data

Collect detailed information, including:

• Employee full-time status
• Coverage offered and its duration
• Months of health coverage provided

Remember that you will need to submit an individual 1095-C form for each employee.

Step 3: Track coverage affordability

Ensure the health coverage offered meets ACA affordability standards. The employee’s contribution for the lowest-cost plan should not exceed 9.02% of their annual household income, calculated on the Federal Poverty Line (FLP) minimums for each region.

This works out as a maximum monthly premium of $113.20 per month for the contiguous US ($141.39 in Alaska and $130.11 in Hawaii) for a single-person household. The FPL thresholds increase depending on the number of individuals living in the household.

See also: A Guide to Surviving Open Enrollment 2025 for US HR Teams

Step 4: Complete forms 1094-C and 1095-C

Here’s how to complete each section of these all-important forms:

a. Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns)

Part I – ALE member

• Line 1: Enter the name of the employer
• Line 2: Enter the employer’s EIN
• Line 3: Provide the employer’s complete address (street, city, state, and ZIP code)
• Line 4: Enter the employer’s contact name
• Line 5: Provide the employer’s phone number
• Line 6: Enter the total number of Forms 1095-C being submitted with this transmittal

Part II – ALE member information

• Line 7: Check the box for "Authoritative Transmittal" to indicate if this is the authoritative summary for the employer
• Lines 8-16: Complete lines as applicable for the ALE group members or subsidiary companies (if any)

Part III – ALE member information – monthly

• Column (a): Indicate if the employer offered Minimum Essential Coverage (MEC) for all 12 months. Use “Yes” or “No”
• Column (b): Enter the number of full-time employees for each month
• Column (c): State the total number of employees (full-time and part-time) for each month
• Column (d): Check if the ALE is part of an aggregated ALE group for each month
• Column (e): If applicable, enter the name(s) and EIN(s) of other members of the aggregated ALE group

Part IV – Other ALE members of the aggregated ALE group

• Enter the names and EINs of any other ALE members within the aggregated ALE group, if applicable

b. Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)

Part I – Employee information

• Lines 1-6: Enter the employee’s full name, address, and Social Security Number (SSN)

Part II – Employer information

• Lines 7-13: Provide the employer’s name, EIN, and address

Part III – Covered individuals

• If the employee and dependents are covered under the employer’s health plan, complete this part:
  • Lines 17-22: List the covered individuals’ names, SSNs, or Dates of Birth (DOBs), and indicate the months they were covered by checking the appropriate boxes

Line-by-line guidance for Part II (Lines 14-16):

• Line 14: Enter the offer of coverage code (from Code Series 1) to indicate the type of coverage offered to the employee for each month (i.e., 1A, 1E)
• Line 15: If the code on Line 14 requires it, enter the employee share of the lowest-cost monthly premium for self-only coverage
• Line 16: Use the safe harbor code (from Code Series 2) to report why an employer was or was not subject to a potential shared responsibility payment for each month (i.e., 2C, 2F…)

Common codes for Line 14:

• 1A: Qualifying offer (minimum essential coverage providing minimum value offered to full-time employees with the employee contribution for self-only coverage less than or equal to 9.02% of the mainland single federal poverty line)
• 1E: Minimum essential coverage providing minimum value offered to the employee and at least minimum essential coverage offered to spouse and dependents

Common codes for Line 16:

• 2C: Employee enrolled in coverage offered
• 2F: Section 4980H affordability Form W-2 safe harbor
• 2G: Section 4980H affordability federal poverty line safe harbor

Step 5: File with the IRS and distribute forms

• File Forms 1094-C and 1095-C electronically by March 31
• Distribute Form 1095-C to employees by January 31

Common ACA reporting challenges and solutions

Data accuracy

Accurate data collection is one of the most critical aspects of ACA reporting. Ensuring data accuracy minimizes the risk of errors that could lead to penalties.

Tip: Establish a robust system for data collection and verification. Use payroll and HR software that can integrate employee data and provide real-time validation to reduce manual errors. Double-check data such as employee identification, full-time status, and health coverage details before submission.

To enhance accuracy:

• Regularly audit employee data and coverage records
• Maintain consistent communication between HR and payroll departments
• Utilize checklists and templates that align with IRS guidelines

For detailed guidelines, refer to IRS ACA Reporting Information.

Affordability calculations

Ensuring that the coverage offered is affordable is a key part of ACA compliance. The ACA defines affordability as the employee’s share of the lowest-cost self-only coverage not exceeding 9.02% of their household income for 2025.

However, employers are unlikely to know an individual’s household income since it may include the income of a spouse or dependent.

Solution: Use one of the three affordability safe harbors. These are IRS-approved heuristics that help employers estimate their employees’ insurance programs’ eligibility.

• Federal Poverty Line (FPL) Safe Harbor: Ensures coverage is affordable if the employee’s cost does not exceed a set percentage of the federal poverty line
• Rate of Pay Safe Harbor: Compares the employee’s monthly premium to their monthly wages
• W-2 Safe Harbor: Uses the total wages reported on the employee’s W-2 form to confirm affordability

In all cases, the maximum allowable percentage is 9.02% for 2025. Check with the IRS’s ACA minimum value and affordability guidance for current information.

Deadline management

Meeting ACA deadlines is vital to avoid penalties.

Set internal deadlines at least a few weeks ahead of the IRS deadlines to account for unexpected delays. Implement an internal checklist to track the completion of tasks such as data collection, form preparation, and distribution.

So, if forms 1094-C and 1095-C must be filed by March 31, then set an internal deadline of March 8th, for instance. Since 1095-C forms must be distributed to employees by January 31, begin this process in the New Year.

Practical steps include:

• Scheduling periodic checks leading up to deadlines
• Assigning roles within HR and payroll teams to handle different stages of the process
• Use process tracking software to ensure you are on track with compliance deadlines

Penalties and consequences for non-compliance

Overview of penalties

Employers who fail to file accurate or timely ACA reports may face significant fines. The penalties for 2024 are:

• Late or incorrect filing: Up to $280 per form
• Intentional disregard: Higher penalties apply if the IRS determines that non-compliance was intentional

Penalties can escalate quickly, especially for larger companies filing multiple forms. By making sure data is correct and complete, you can lower your risk of facing fines.

How to manage IRS audits and notices

Given the potential penalties and the administrative burden of making errors, filers should adhere to the following principles:

• Respond promptly to any notice from the IRS
• Review the notice carefully and consult IRS resources to understand the issue
• If errors are discovered, correct them by following the IRS instructions for amending filings. This often involves submitting a corrected Form 1095-C or updating Form 1094-C

For more on handling IRS audits, refer to IRS guidelines on Notices and Corrections.

Tools and resources for ACA reporting

HR and payroll software options

Investing in HR and payroll software can simplify ACA reporting by automating data collection and form preparation. Look for software that integrates seamlessly with your current systems and offers ACA-specific features such as:

• Automated tracking of employee hours and coverage
• Form generation and electronic filing capabilities
• Affordability safe harbor calculations

IRS resources

Make use of free resources provided by the IRS for detailed instructions and guidelines:

• IRS Instructions for Forms 1094-C and 1095-C
• ACA Employer Mandate Information

Third-party support

If managing ACA compliance in-house is too complex or resource-intensive, consider outsourcing. Third-party compliance services can handle data verification, form preparation, and e-filing to ensure you meet all requirements efficiently.

Outsourcing can also provide peace of mind, as experienced providers often have specialized knowledge of ACA reporting intricacies and updated IRS rules.

Streamline US payroll reporting with Deel

Understanding and complying with ACA reporting requirements is essential for avoiding costly penalties and ensuring seamless healthcare coverage for employees. Start preparing early to gather necessary data, meet key deadlines, and reduce stress during filing season.

Begin reviewing your ACA compliance strategy today. Deel PEO and Deel US Payroll services can assist with streamlined benefits administration, compliance support, and comprehensive payroll management across the US. Book a demo to learn more.