Guide for Ensuring Compliance with ACA Reporting and Tax Filings

Navigating ACA reporting requirements and Affordable Care Act (ACA) tax filings can feel like a maze, especially for HR professionals managing a myriad of tasks. However, staying compliant is important—not just for avoiding penalties but also for encouraging a workplace that aligns with legal standards.

This guide breaks down ACA compliance for HR professionals, helping you understand the essential steps, forms, and strategies for successful reporting and tax filings.

What Is ACA Reporting?

At its heart, ACA reporting is how employers communicate details about the health coverage offered to employees to the IRS. The IRS (Internal Revenue Service) uses this data to verify compliance with ACA reporting requirements and determine whether employees qualify for premium tax credits through the Health Insurance Marketplace.

The ACA established two core grants for employers:

Employer Shared Responsibility Provision (ESRP): Requires applicable large employers (ALEs) to offer affordable, minimum-value health insurance to full-time employees.
Information Reporting Requirements: Employers must file specific forms with the IRS and provide copies to employees to prove compliance.

If your company qualifies as an ALE (50 or more full-time or equivalent employees), filing these reports isn’t optional—it’s a legal duty.

Key ACA Reporting Forms for Tax Filings

Staying on top of forms is a significant part of HR compliance with ACA. Here are the main forms you need to know:

Form 1095-C: Details the health insurance offered to employees. Employers send this to both the IRS and employees.
Form 1094-C: A summary sheet accompanying Form 1095-Cs sent to the IRS.
Forms 1095-B and 1094-B: Used for smaller employers or insurers providing self-funded health plans.

Each form has its purpose, and submitting the correct forms is key to accurate IRS ACA reporting forms.

Why ACA Reporting Matters?

For HR professionals, understanding how to manage ACA reporting and avoid penalties is a critical skill. Failing to file accurate forms or meet deadlines can result in significant fines. By mastering these requirements, you can safeguard your organization’s financial health and ensure compliance.

Steps to Ensure ACA Compliance

1. Identify Your ALE Status

To know if your company must report, calculate your ALE status:

Count full-time employees (those working 30+ hours weekly).
Add full-time equivalent hours (part-time hours divided by 120).
If your total equals 50 or more, you’re an ALE.

Pro Tip: Review these numbers annually, as ALE status is based on the previous year’s workforce data.

2. Accurately Track Employee Hours

Accurate record-keeping is essential for ACA compliance. A solid time-tracking system helps you determine which employees qualify as full-time under the ACA. Use reliable HR software to log hours for:

Full-time employees.
Part-time or variable-hour staff.

This ensures you meet ACA compliance guide standards without over-reporting or underestimating.

3. Verify Health Plan Coverage

An ACA-compliant plan must meet these criteria:

Affordability: Premiums for employee-only coverage cannot exceed a set percentage (9.12% in 2023) of household income.
Minimum Value: The plan must cover at least 60% of expected healthcare costs.

Collaborate with your insurance provider to confirm your health plans meet these benchmarks.

4. Prepare and Distribute IRS Forms

Each year, employers must:

Provide Form 1095-C to employees by January 31.
Submit Forms 1095-C and 1094-C to the IRS by March 31 (electronic) or February 28 (paper).

Tip: Double-check all employee details to avoid mailing issues.

5. Stay Ahead of Deadlines

Missed deadlines for Affordable Care Act tax filings can lead to penalties. Create a reporting calendar with reminders to stay organized.

Common Challenges in ACA Reporting

Handling Variable-Hour Employees

Determining full-time status for variable-hour employees is one of the most common challenges. The Look-Back Measurement Method can simplify this process by averaging hours over a set period.

Data Accuracy

Errors in employee data or hours worked can disturb your reporting efforts. Partnering with a payroll provider or investing in ACA compliance guide software reduces the chance of mistakes.

Managing Corrections

Errors in forms happen. If you catch a mistake, file corrected forms quickly and notify employees of changes.

The Cost of Noncompliance

Failing to comply with ACA reporting requirements can be costly:

Section 4980H(a) Penalty: Employers not offering coverage to 95% of full-time employees may face fines of $2,880 per employee annually (minus the first 30 employees).
Section 4980H(b) Penalty: Additional penalties apply if coverage isn’t affordable or doesn’t meet minimum value.

Penalties are calculated monthly, so even short lapses can add up. Conduct regular audits to ensure compliance.

How to Manage ACA Reporting and Avoid Penalties

Here are some practical tips for stress-free reporting:

Leverage Technology: HR systems like ADP or Gusto automate form submissions and track employee hours accurately.
Seek Expert Help: Hiring a consultant familiar with ACA compliance for HR professionals can save time and resources.
Stay Informed: Regulations change, so monitor updates to ensure your practices remain current.

ACA Compliance Tools for HR Professionals

Simplify HR compliance with ACA by using technology designed for reporting:

HRIS Platforms: Track hours and manage benefits in one place.
Dedicated ACA Tools: Platforms like Paycor or ACAwise streamline filings.
IRS Resources: Access free guides and FAQs on the IRS website to clarify reporting requirements.

ACA Reporting: More Than a Tax Obligation

While IRS ACA reporting forms fulfill tax obligations, they’re also an opportunity to demonstrate compliance and care for your team. By following this guide and leveraging available tools, you’ll ensure smooth operations and a stronger workplace.

Creating a positive workplace culture starts with compliance. Building a workplace culture that supports employees and aligns with the law builds trust and transparency, ensuring your team feels valued and secure.