ACA Filing Requirements – Everything You Need to Know

Monday, August 22, 2022 17:24 Posted by Admin

Since its introduction in 2010, the Affordable Care Act (ACA) has made health insurance more accessible to millions of Americans. The passing of this act represented an overhaul of the healthcare system that employers had to adapt to.

In 2016, the Employer Share Responsibility (ESR) provision of the ACA became active. This provision requires certain employers to provide a minimum standard of health insurance to their employees. Employers who must provide insurance are also subject to ACA filing requirements that ensure they’re following the ESR provision appropriately.

These ACA compliance requirements can easily trip employers up. Furthermore, failure to meet your ACA employer reporting requirements could put you in line for a penalty from the Internal Revenue Service (IRS).

So, you need to know what the requirements are. In this article, we explain how ACA filing for employers works, who has to do it, and everything you need to know to ensure your company is compliant.

What Are the Basic ACA Filing Requirements?

ACA filing is a process where you submit various pieces of information gathered from your health insurance reporting to the IRS. The information provided varies based on the type of report you have to file, though it typically includes information like the following:

• Taxpayer Identification Numbers
• Employee Identification Numbers
• Each employee’s address
• Any dependents registered to the employee
• Details about the duration of coverage an employee and their dependents have received

ACA filing requirements state that employers must provide copies of the forms they complete to both the IRS and their employees. Three types of forms may be required to meet ACA compliance requirements.

Form 1095-A

Any individual who purchases health insurance via federal or state-run insurance exchange, commonly referred to as marketplaces, must file Form 1095-A. Employers generally don’t need to worry about this these forms because they’re specifically for those with individual health coverage.

Form 1095-B

Any employer that offers a self-funded health insurance plan to employees must file Form 1095-B. Self-funded plans typically see the employer paying for insurance claims as they occur rather than paying a monthly premium to an insurance carrier.

Form 1095-C

This is the form that Applicable Large Employers (ALEs) must complete to meet ACA employer requirements. As a business owner, this is likely the form that you’ll need to fill out. Form 1095-C relates to any group health plans a business provides for full-time employees during the previous calendar year.

What Types of Businesses Have to Meet ACA Filing Requirements?

Your reporting responsibilities vary depending on several factors, including your company size, how many people it employs, and whether you have an insurance policy.

Generally speaking, any company that employs at least 50 full-time employees or full-time equivalent employees must submit the appropriate forms to the IRS. If your company meets these criteria, it’s classed as an ALE. All ALEs must offer health insurance that covers 95% of their full-time employees and is consistent between employees. That means you can’t customize the level of insurance each employee receives.

An individual is classed as a full-time employee if they work at least 30 hours per week or work for at least 130 hours per month. Furthermore, the insurance offered must be considered affordable, which means any employee contributions shouldn’t total more than 9.61% of their household’s annual income.

If an ALE fails to provide appropriate health insurance to its full-time employees, it’s subjected to financial penalties. In 2022, these penalties amount to $2,750 per employee, though they vary each year.

However, it’s important to note that employers that aren’t ALEs may also need to meet ACA employer reporting requirements. This is particularly the case if the employer has a self-insured health plan.

When and What Should You File – A Breakdown

It helps to understand the specific types of forms you must file based on the type of business you operate and the size of the company. Typically, you need to file either Form 1095-B or Form 1095-C. Along with these forms, you may also have to file Form 1094-B or Form 1094-C, both of which are transmittal forms that provide additional details. They’re fairly simple in that they only require you to provide the filer’s details and some basic information about the number of Forms 1095-B or 1095-C you’ve submitted.

Here is a quick breakdown of when you may need to file each of these forms.

No Forms

You don’t have to meet any ACA employer reporting requirements if you have fewer than 50 full-time employees and don’t offer a self-funded health insurance plan (including not offering insurance at all).

Forms 1095-B and 1094-B

You must file these forms if you have fewer than 50 employees and you operate a self-insured health plan. Employers must complete Parts I, II, and III of Form 1095-B, in addition to providing a copy of the form to their employees.

Forms 1095-C and 1094-C

These forms are typically reserved for ALEs. However, there is some variance in the parts of Form 1095-C your company must complete based on the type of insurance it offers:

• ALEs that provide self-insured health coverage must complete Parts I, II, and III of Form 1095-C. They must also make copies of these forms available to employees.
• If an ALE offers no health insurance, it must complete Parts I, III, and IV of Form 1095-C. Again, this form has to be provided to employees.
• ALEs that offer traditional health insurance, such as group insurance, should complete Parts I and III of Form 1095-C. Copies must be provided to employees.

The Deadlines for ACA Filing

Employers must meet their ACA filing requirements for the previous tax year in the current tax year. For example, an employer completes their reporting for the 2021 tax year in 2022. There are three important deadlines you must meet to ensure your company doesn’t run into any issues with the IRS:

• January 31st – All employees must receive copies of their appropriate Form 1095-C or Form 1095-B.
• February 28th – This is the deadline for submitting paper copies of Form 1095-C and Form 1095-B, along with their connected transmittal forms.
• March 31st – The final deadline for digital submissions of Form 1095-C or Form 1095-B, again along with their relevant transmittal forms.

How to Calculate Full-Time and Full-Time Equivalent Employee Numbers

With the number of full-time employees (FTEs) your company has playing such an important role in ACA filing requirements, you need to know how to calculate how many FTEs you have.

To do that, you need to know what an FTE is under the ACA:

• The employee works for at least 30 hours per week or has irregular weekly hours that combine to reach a total of 130 hours per month. Note that this is different from what many companies believe to be full-time, with most assuming it’s 40 hours per week. Failure to account for this means you may fail to count employees that the ACA considers full-time, leading to incorrect filing.
• If you have part-time employees or employees who aren’t classified as full-time, you still need to include their work hours in your calculations. These become full-time equivalent employees if they combine to work enough hours to be classed as an FTE.

You also have to consider whether your employees are paid hourly or are salaried.

The calculation is much simpler for hourly employees. Simply count the number of hours worked and you can determine if they’re an FTE or not.

For salaried employees, you have three choices:

1. Count the number of actual hours worked.
2. Assume a days worked equivalence of eight hours per day. For example, a salaried employee who works for four days has worked for 4 x 8 hours, which equals 32 and makes them an FTE.
3. Assume a weeks-worked equivalence, which is 40 hours per week for each week that contains at least one hour of service.

How Do Eligible Hours Factor In?

Eligible hours cover any period where an employee isn’t at work but still receives payment. Examples include sick pay, jury duty, military duty, vacations, and issues related to disability. All of these hours count toward your calculations because you’re counting the hours of service provided rather than the number of hours worked.

This is an important distinction.

For example, let’s say you have an employee who works eight hours per week and five days per week. However, they choose to take two of the five days off as a vacation. In this scenario, the employee has worked for 24 hours. However, they’ve still provided 40 hours of service due to the additional 16 hours being paid vacation.

Calculating Full-Time Equivalent Employee Hours

You’ll need to figure out the number of service hours provided to your company by non-FTE employees because they’re included in the totals required for your ACA compliance requirements. For example, your company may have 45 FTEs and 10 part-time employees each working 25 hours per week.

In this scenario, you have to consider whether your 10 part-time employees work enough hours to cause you to reach the 50-FTE requirement that makes your company an ALE. Our example currently shows us that the business needs five more FTEs to be classed as an ALE, which is the equivalent of 150 hours of work per week. This is due to the minimum hours an FTE works under the ACA filing requirements being 30 hours per week, regardless of how many hours your full-time employees actually work over that.

However, our example business has 10 part-time employees working 25 hours per week. Follow the steps below to determine how many equivalent FTEs you gain:

1. Calculate the total part-time service hours accumulated each month by multiplying the number of part-time employees by the hours each employee works: 10 x 25 = 250
2. Then, multiply this number by the four weeks there are in each work month: 250 x 4 = 1000
3. Divide the total from the previous calculations by 120: 1000 / 120 = 8.3(3), repeating
4. If your calculation produces a fraction, round this down to the nearest whole number. In our example, this means we get eight.

So, our example company has 10 part-time employees producing equivalent work to eight FTEs. If we add those eight FTE equivalents to the 45 actual FTEs the company already has, we see it now has 53 FTEs, which means it needs to file Forms 1095-C and 1094-C.

Use these calculations to determine if your company has the appropriate number of employees to be classed as an ALE. If you get a figure below 50, you only need to meet ACA employer reporting requirements if you have a self-insured health plan.

Quick Tips for Meeting ACA Filing Requirements

Hopefully, the information provided thus far helps you to better understand how ACA filing for employers works. The following are some quick tips to help you with the filing procedure each year:

• Conduct an ACA audit on any previous reports you’ve filed. Do this to catch errors and confirm any changes, such as increases in the number of FTEs in your organization.
• Consider having professionals check your ACA forms before submitting them. The IRS may charge a penalty of up to $270 per return for inaccurate forms. This can rise to $550 if the IRS believes you completed the form incorrectly on purpose.
• Check deadlines and possible extensions to ensure you get the forms in on time.
• Look for small errors. For example, an employee may have a hyphenated surname on their Social Security card. But you may miss the hyphen on Form 1095-C. The IRS will class this as an error and may charge a penalty for it.

Get to Grips With ACA Filing Requirements

There’s no getting around the fact that ACA compliance requirements are complex. The good news is that you may not have to file any forms at all. If you have a small business with fewer than 50 FTEs and don’t operate a self-insured health insurance policy, you don’t have to worry about filing.

But ALEs and smaller businesses that have self-insured plans do need to file the appropriate forms. Use this guide to ensure you complete the correct forms and understand whether you have a small business or an ALE.

Of course, you need to business health insurance policy before you can meet many of these requirements. Taylor Benefits Insurance Agency is an insurance broker and employee benefits plan specialist that can help you find the right insurance policy for your company. To find out more, get in touch online or by calling at 800-903-6066.