Businesses Affected by ACA Reporting

ACA reporting responsibilities depend on employer size and the type of insurance you maintain, whether insured or self-insured.

In general, the reporting requirements apply if you're an employer with 50 or more full-time employees or equivalents, a self-insured employer, regardless of size, or a health insurance provider. The IRS forms used to report this information are 1095-B and 1095-C, along with transmittal forms 1094-B and 1094-C.

For clarification, you're a self-insured -- or self-funded – employer if you pay for medical claims directly instead of paying premiums to an insurance provider.

ACA Reporting for Smaller, Self-Insured Employers

There are relatively few small businesses that must comply with ACA reporting requirements.
The ACA defines a small business as those with fewer than 50 full-time employees, or FTEs.

Self-insured businesses, complete the 1095-B (and 1094-B transmittal form) to report the name, address, SSN or other TIN, Date of Birth (if SSN or other TIN is not available) and months of coverage for the employee and any covered individuals.

Small businesses that aren't self-insured don't need to report offers of health coverage to the IRS and are not required to furnish any statements to employees.

ACA Reporting for Applicable Large Employers (ALEs)

The ACA reporting requirements primarily affect applicable large employers—those with 50 or more full-time or full-time equivalent employees.

Keep in mind an ALE may be a single entity or may consist of a group of related entities under common control or an Aggregated ALE Group. Examples include parent and subsidiary, or other affiliated entities. If the Aggregated ALE Group, considering the employees of all ALE Members in the group, employed on average 50 or more full-time employees (including full-time equivalent employees) on business days during the preceding calendar year, then the Aggregated ALE Group is an Applicable Large Employer and each separate employer within the group is an ALE Member. Each ALE Member is required to report offers of coverage to its full-time employees (even if the ALE Member has fewer than 50 full-time employees of its own). Each ALE Member must file its own forms under its own separate EIN, even if the ALE Member is part of an Aggregated ALE Group. No Authoritative Transmittal should be filed for an Aggregated ALE Group.

Calculating Full-Time and Full-Time Equivalent Employees (FTEs)

Since the definition of an applicable large employer includes full-time and full-time equivalent employees in a preceding calendar year, it's important to understand the distinctions.

• Full-time employee: Averages at least 30 hours of service per week during the month (or 130 hours in a calendar month)
• Full-time equivalent employee: Combination of employees, each of whom is not treated as a full-time employee, but that, together, count as a full-time employee
• Don’t forget to include nonemployees who met these requirements during your measurement period. For example, a nonemployee director, an individual who was a retired employee during the entire year, or a nonemployee COBRA beneficiary, including a former employee who terminated employment during a previous year

Note: Hours of services represent each hour an employee is paid or entitled to payment, including vacation, leave, holiday, illness, incapacity, layoff, jury duty, military duty and other leaves of absence.

To determine the number of full-time equivalent employees for a month:

Once you've calculated your FTEs, add that number to your total number of full-time employees on staff to determine whether or not you're an applicable large employer.

Compliance insight

Keeping track of the number of full-time and full-time equivalent employees, as it pertains to the ALE classification, is critical. This classification is determined each calendar year and depends on the average size of your workforce in the prior year.

Not included in the calculation are owners of a sole proprietorship, partners, shareholders owning more than 2% of an S corporation, owners of more than 5% of other businesses, family members or members of the household who qualify as dependents on the individual income tax return of a person listed above, including a spouse, child (or descendant of a child), sibling or step-sibling, and parent (or ancestor of a parent), step parent, niece or nephew, aunt or uncle, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, seasonal workers working 120 days or less in a year, independent contractors (Form 1099 workers), COBRA and retired enrollees.

Calculating Full-Time equivalent (FTE) Employee hours for ACA reporting can be confusing and complicated. Errors in the calculations can lead to penalties and fines. You may want to consider investing in time-tracking software designed for ACA compliance, or choose to outsource this responsibility to a payroll vendor with specific skills to determine the appropriate treatment of employees with varying schedules.

Form 1095-B Filing Instructions for Smaller, Self-Insured Businesses

Self-insured businesses with fewer than 50 full-time employees must complete Form 1095-B (and the 1094-B transmittal form if not e-filing).

To report the necessary information to the IRS and furnish a form to employees, you'll need to complete:

• Part 1: Responsible Individual – Includes name and address of primary person insured, Social Security number and code for Origin of the Policy (A. Small Business Health Options Program (SHOP), B. Employer-sponsored coverage, C. Government-sponsored program, D. Individual market insurance, E. Multi-employer plan, F. Other designated minimum essential coverage)
• Part 2: Employer Sponsored Coverage -- Not applicable for self-insured employers; can be left blank
• Part 3: Issuer or Other Coverage Provider – Includes name and address of coverage provider (in this case, the employer), Employer Identification Number (EIN), address and phone number
• Part 4: Covered Individuals – Includes Social Security number (or date of birth, if not available) for each covered individual, as well as coverage offered each month

1094-B Transmittal Form at a Glance

The 1094-B transmittal form represents the total 1095-B filings submitted. Acting as a cover sheet for paper filed forms, it is a brief form that includes:

• Identifying information for your organization, such as name, address and Employer Identification Number (EIN)
• Total number of 1095-Bs being submitted with this cover sheet

Form 1095-C Filing Instructions for Insured and Self-Insured ALEs

To satisfy the reporting requirements, fully insured and self-insured applicable large employers must complete Form 1095-C (and the 1094-C transmittal form).

If you offer health insurance, you'll complete Parts I and II of the 1095-C. Self-insured employers will complete Parts I, II and III. Every employee of an ALE who is eligible for insurance can request to receive a 1095-C. That means even eligible employees who decline to participate in an employer's health plan can request to receive a 1095-C.

To report the necessary information to the IRS and furnish a form to employees, you'll need to capture a number of details, as follows:

• Part 1: Employee and Applicable Large Employer Member (Employer) – Includes identifying information for the employee, such as name, address and Social Security number (SSN) – and identifying information for the employer, such as name, address and Employer Identification Number (EIN).
• Part 2: Employee Offer and Coverage – This section is all about the offer of coverage. In the four lines here, you'll enter information about the health coverage offered by month (if any), the monthly employee required contribution for self-only coverage, and the months you met an affordability safe harbor or made other relief available to the employee.
• Part 3: Covered Individuals – If you're self-insured, this section is about the coverage that was actually supplied, which includes information about covered individuals' enrollment in the plan. This includes Social Security numbers or, if these numbers aren't available, date of birth. (This information isn't completed by insured employers because it's captured separately by the health insurance providers themselves, through the 1095-C.)

All ALEs need to submit this form (Parts I, II, and III) even if they do not offer insurance and are not self-insured. In addition, upon request, employers must furnish a copy of the 1095-C to the employee.

Lines 14-17 on the 1095-C

Most of the effort involved in completing Form 1095-C centers on Lines 14 through 17 in Part 2.

The "Offer of Coverage" on Line 14 – which involves eleven codes, 1A through 1U -- describes whether or not minimum essential coverage was offered to an employee, spouse and/or any dependents. This information is focused on the offer of coverage—not necessarily whether coverage was actually provided. If one code applies for the entire 12 months, you only need to enter it once in the "All 12 Months" column.

For example, if an employee was offered coverage that included both themselves and their spouse, but chose to enroll in employee-only coverage then Line 14 must indicate that the employee was offered family coverage.

On Line 15, report the amount of the Employee Required Contribution generally, the employee share of the monthly cost for the lowest-cost, self-only, minimum essential coverage providing minimum value that is offered to the employee. This helps the IRS determine if affordable coverage was made available to the employee. Only complete this section if code IB, IC, ID, IE, IJ, IK, IL, IM, IN, IO, IP, IQ, IT or IU is entered on line 14 either in the "All 12 Months" box or in any of the monthly boxes. Include cents with this figure and don't round numbers. If you entered 1A on Line 14, nothing needs to be entered on Line 15 because this code indicates you offered essential coverage providing minimum value to the employee, spouse and/or dependents.

Note that the amount entered might not be the amount the employee is paying for the coverage, for example, if the employee chose to enroll in more expensive coverage, such as family coverage, or if the employee is eligible for certain other healthcare arrangements.

Line 16 – has nine codes available.  Codes 2A-2I are used to report for 1 or more months of the calendar year that one of the following situations applied to the employee. The employee was not employed or was not a full-time employee, the employee enrolled in the minimum essential coverage offered, the employee was in a Limited Non-Assessment Period with respect to section 4980H(b), the ALE Member met one of the Section 4980H affordability safe harbors with respect to this employee, or the ALE Member was eligible for multiemployer interim rule relief for this employee. If no indicator code applies, leave line 16 blank. In some circumstances, more than one indicator code could apply to the same employee in the same month. For example, an employee could be enrolled in health coverage for a particular month during which they are not a full-time employee. However, only one code may be used for a particular calendar month. Note: There is no code to enter on line 16 to indicate that a full-time employee offered coverage either did not enroll in the coverage or waived the coverage.

If the ALE Member used code 1L, 1M, 1N, 1O, 1P, 1Q, 1T, or 1U because it offered the employee an individual coverage Health Reimbursement Arrangement (HRA), an employer-funded health benefit plan that reimburses employees for qualified medical expenses and, in some cases, health insurance premiums, enter the appropriate ZIP code used for identifying the lowest cost silver plan used to calculate the Employee Required Contribution in line 15. This will be the ZIP code of the employee’s residence (code 1L, 1M, 1N, or 1T) or the ZIP code of the employee’s primary site of employment if the ALE Member uses the work location safe harbor (code 1O, 1P, 1Q, or 1U).

Work location safe harbor for individual coverage HRAs. For purposes of section 4980H(b), an employer may use the cost of self-only coverage for the lowest cost silver plan for the employee for self-only coverage offered through the Exchange where the employee’s primary site of employment is located for determining whether an offer of an individual coverage HRA to a full-time employee is affordable. The ZIP code for the employee’s primary site of employment is used to identify the applicable lowest cost silver plan to determine affordability.

1094-C Transmittal Form at a Glance

An ALE Member must file a Form 1094-C designated as the Authoritative Transmittal, used to report to the IRS summary information for each Applicable Large Employer and to transmit paper filed Forms 1095-C to the IRS.

Part I Applicable Large Employer Member (ALE Member) information includes:

• Identifying information for your organization, such as name, address and Employer Identification Number (EIN)
• Total number of Forms 1095-C submitted with this transmittal
• Confirmation this is the authoritative transmittal for the ALE Member

Part II ALE Member Information includes:

• Identifying information for your organization, such as name, address and Employer Identification Number (EIN)
• Total number of Forms 1095-C submitted with this transmittal
• Confirmation this is the authoritative transmittal for the ALE Member

Important Deadlines and Penalties to Avoid

The deadlines for filing Forms 1094 and 1095—whether by paper or electronically—differ from those for other information returns and W-2s. This means:

* Issuers are no longer automatically required to furnish copies to recipients. However, if recipients request copies the issuer must comply. If requested prior to January 1, the issuer must furnish by January 31 (or next business day when January 31 falls on the weekend). If the request is made after January 1, the issuer must furnish by 30 days after requested.
https://www.congress.gov/bill/118th-congress/house-bill/3797

Electronic filing is required if the employer files 10 or more forms or returns during the calendar year. The 10 or more total includes partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns. Filers are required to aggregate almost all information return types to determine if the total exceeds the 10 return limit.

Avoiding Filing and Furnishing Penalties

In addition to any Employer Shared Responsibility Penalties, employers must also adhere to any requirements to file to IRS and furnish to recipients (upon request) forms that comply with the Sections 6721 and 6722 information return standards. If an employer fails to file a correct information return by the due date and cannot show reasonable cause, the employer may be subject to a penalty. The Section 6721 penalty applies for:

• Failure to file timely, or at all
• Failure to include all information required to be shown on a form, or
• Including incorrect information on a form
• Filing on paper when you were required to e-file,
• Reporting an incorrect TIN or failure to report a TIN, or
• Failure to file paper forms that are machine readable when required by applicable revenue procedures.

The Section 6722 penalty is a separate penalty and is applied in the same manner as the penalty for section 6721 violations. Basically, if the employee requests a copy of the form, you fail to provide it and you cannot show reasonable cause, you may be subject to a penalty.

The penalty applies for:

• Failure to provide the requested form by the due date (January 31 if requested prior to Jan. 1, or within 30 days of the date requested
• Failure to include all information required to be shown on the form
• Including incorrect information on the form

Reporting Penalty	Amount of Penalty
Failure to file with the IRS Section 6721	$340/form $4,098,500 calendar year maxiumum
Failure to furnish a requested recipient copy Section 6722	$340/form $4,098,500 calendar year maxiumum
Filed/furnished after August 1 or not at all Combined calendar year maximum	$340/form $8,197,000 ($2,732,000 for small businesses)
Intentional Disregard to file/furnish	$680/form no calendar year maxiumum

Capturing and Tracking Necessary Data

The information gathering process can be challenging for many businesses. Data collection and completing the forms accurately and on time will require careful coordination, information sharing, and ongoing monitoring. To capture all the information required to complete Form 1094 and Form 1095 reporting, employers will need to compile health coverage data from several key internal sources including:

• HRIS (Human Resources Information System): Employee demographics, hire dates, and employment status
• Payroll Systems: Hours worked, compensation data (used for affordability calculations)
• Benefits Administration Platforms: Enrollment details, coverage types, plan start dates, and dependent information
• Timekeeping Systems: Used to determine full-time status under ACA rules

And external sources of information, such as:

• IRS ACA Resource Center: IRS.gov/ACA - Including FAQs, updates, and links to regulations.
• Employer Shared Responsibility FAQs: Clarifying definitions and reporting obligations under ACA
• IRS Instructions for Forms: Official IRS documentation detailing what data is required and how to report it

Because the employee's personal information and health insurer appear on the same form, the data is considered protected health information (PHI). Strict security is necessary to protect the information from unauthorized use. It is essential that employers use a filing provider that is SOC-certified and HIPAA-compliant, to ensure an added layer of protection is in place to maintain the strictest standards of data security. Efile4biz offers several levels of secure form and data handling to protect your employee’s personal information including printing forms at a SOC-2 certified facility and mailing to recipients via first-class mail or electronic delivery utilizing multi-factor authentication to prevent unauthorized access to the forms.

A few essential Dos and Don'ts will ensure a smooth filing process:

• DO notify employees they can request Form 1095B and 1095C by posting a notice on your website informing individuals that they may request a copy. The requirement to provide the statement is met if the notice is:
• Clear, conspicuous, and reasonably accessible to all responsible individuals;
• Timely posted, which for tax year 2025 is by March 2, 2026, and retained until October 15 of the filing year; and
• When requested - Furnished to the individual no later than the later of January 31, 2026, or 30 days after the date of the request
• DON'T file more than one 1094-C authoritative transmittal. (You may file multiple 1094-C forms but only one authoritative transmittal)
• DO file corrected returns as soon as possible after an error is discovered.
• DO file Form 8809, either by paper or electronically if necessary, for a 30-day extension for filing with the IRS. No signature or explanation is necessary for this extension.
• DON'T file more than one 1095-C per employee. If an organization has different divisions with different benefits – and an employee moves between divisions during the year – you'll need to consolidate data onto one 1095-C.

It is important to keep HIPAA compliance in mind when filing healthcare coverage ACA forms, 1095-B and 1095-C. These forms may contain protected health information (PHI), meaning an employer's medical plan is a covered entity subject to HIPAA privacy, security and breach notification rules.

Use Caution When Collecting Sensitive Data

When gathering information for Forms 1095-B and 1095-C, it is probable that you will require Social Security numbers (SSNs) for employees, as well as spouses and dependents covered under the plan.

Collecting SSNs for employees may be a common occurrence, but now you face the added responsibility of obtaining SSNs for spouses and dependents with the ACA reporting requirement, thereby increasing the risk of data privacy and security breaches.

To take the necessary precautions when handling sensitive data, here are some useful tips:

Is the data collected subject to HIPAA?

Determine whether the information gathered for ACA reporting is protected health information (PHI) under HIPAA, or if it falls under any HIPAA exception.

Ensure PHI precaution measures are in place

If data gathered is PHI, certain measures need to be taken under the HIPAA privacy and security rules. All employees should be trained on PHI policies and procedures, with a designated privacy officer implementing practices, including appropriate administrative, technical and physical safeguards to protect the privacy of PHI. All unauthorized use or disclosure of PHI should be reported.

Verify vendors are HIPAA-certified

Third-party vendors are approved by the IRS and can assist in the ACA reporting process. It is important to ensure that the vendor, even as a "business associate" under HIPAA, is HIPAA-certified and contractually bound to maintain and implement the appropriate privacy and security practices.

E-filing for Secure, Streamlined Filing

Need assistance to comply with the many demands of ACA healthcare information reporting requirements? Choose efile4Biz.com for quick, efficient and secure e-filing for ACA forms in addition to various other information returns and wage reporting statements including 1098s, 1099s, W2s and Form 1042-S. Our online portal is secure, convenient and with the easy-to-use interface you can complete the forms quickly, saving valuable time. There's no software to download and no paper forms to purchase, you enjoy streamlined, one-step secure processing.

Take advantage of:

E-file support - Simply enter or import applicable employee information and efile4Biz.com will electronically file forms 1095-B, 1095-C, and Authoritative transmittal 1094-C with the IRS. Need to provide employee copies, the choice is yours. We offer First Class Mail or electronic delivery of employee copies.

Print and mail - For health insurance providers, payroll service providers and employers seeking high-volume processing of ACA forms, efile4Biz.com offers comprehensive print-and-mail services out of a secure, SOC and HIPAA-certified facility. SOC compliant means our print facility adheres to the System and Organization Controls (SOC) framework, demonstrating that we have effective internal controls in place for data security, privacy, and operational integrity. Efile4biz print facility also complies with the Health Insurance Portability and Accountability Act (HIPAA). This certification demonstrates that we have implemented the necessary safeguards to process Protected Health Information (PHI).