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How To Follow ACA Reporting Requirements & Avoid Penalties

Image of Affordable Care Act (ACA) with stethoscope

HR Question:

I’m confused by the Affordable Care Act’s (ACA) reporting requirements. Can you clarify the reporting standards and deadlines so we can avoid penalties and remain compliant?

HR Answer:

You’re not alone. Many organizations struggle to understand if they are following the Affordable Care Act (ACA) reporting standards correctly while others are not aware that they need to report in the first place. If you aren’t in compliance with ACA reporting requirements, each employee represents a potential fine. These fines can range from hundreds to millions of dollars—easy enough to bankrupt a smaller organization.

We’ve saved clients millions of dollars in potential fines from ACA reporting violations. It starts with a good understanding of the employer mandate because not every company is required to report.

Who is required to report?

Any employer with self-insured medical benefits or with 50 total full-time and full-time equivalent (FTE) employees is required to report to the IRS. (Not sure if you have 50 full-time equivalent employees? Here’s a guide to do the math.) This reporting includes the coverage the employer offered to its FTEs as well as any eligible dependents.

What are the IRS reporting deadlines for 2023 (2022 tax year)?

Employers that qualify to report need to complete IRS Form 1095 for each full-time equivalent employee by February 28, 2023, for paper filers or March 31, 2023, for electronic filers. Employers with more than 250 forms are required to file electronically.

What happens if I don’t report or report incorrectly?

Employers need to both file 1095 forms with the IRS and provide a 1095-C form to all full-time equivalent employees to comply with the ACA mandate. Failure to report to the IRS could result in two different types of penalty notices, Section 4980H(a) and Section 4980H(b) penalties. If you receive a penalty notice, check out our previous article on what to do.

Potential fines for not following ACA reporting requirements

If an employer does not file their ACA reporting on or before February 28 or March 31, or if an employer submits reporting on time but with incomplete information, they are subject to a fine of $250 per return up to a maximum of $3 million dollars in one calendar year. In other words, each full-time equivalent employee for whom you must generate a 1095-C form represents a potential fine of $250. If an organization has 150 full-time equivalent employees and there are errors in their ACA filing, they could potentially be fined $37,500. If the organization has 1,500 full-time equivalent employees, that potential fine rises to $375,000.

Corrections can help

An organization that has already received an IRS violation can still recoup some of their losses if they act within 30 days of the February 28 or March 31 filing deadline. Successful corrections drop the per-return penalty from $250 to $50, with a calendar-year maximum of $500,000 (versus $3 million).

If more than thirty days have passed since the filing deadline, it’s still worth it for organizations to correct their returns. If corrections are submitted by August 1, 2023, the per-return penalty drops from the original $250 to $100, with a calendar-year max of $1.5 million.


Want to learn more?

Sign up for our free webinar “ACA – All Your Questions Answered” on February 15!


How to avoid IRS penalties

Organizations should be sure they are familiar with the ACA reporting requirements, deadlines, and what might happen if they don’t file accurately or on time. Not only is a lot of money on the line, but potentially a lot of rework.

Many organizations rely on their payroll provider to handle ACA filing. Even though that provides them with less control over the ACA filing process, there are still ways to gain more confidence they are submitting error-free returns.

1. Have someone else prepare the returns

If an organization has an HRIS system to prepare and file returns, that’s the best-case scenario. Otherwise, the HR department will be essential in helping gather information needed about employee hours, enrollment specifications, and other relevant information. Even if an organization has an HRIS provider, we recommend they…

2. Have someone else double-check the returns

Engaging a specialist to ensure your returns are correct can set organizations up for success for the future by showing them everything they need to know and do to keep IRS penalties out of the equation. For example, Strategic HR employs certified health reform experts that know the Affordable Care Act inside and out, and we work with our clients to ensure they are reporting correctly.

3. Respond promptly to any IRS penalty notifications.

If an organization is faced with penalties or requests for more information from the IRS, the best thing to do is respond promptly, assure the operations manager assigned to the case that the issue is top of mind, and request a filing extension if needed. As we stated before, ACA penalties can increase by the day, and it’s best to act quickly.

You can save millions with ACA reporting compliance checks

ACA compliance is complicated. The threat of millions in fines adds fear on top of complication. It is well worth it to review your ACA compliance reporting, which was proven when our ACA expert saved one client $1 million in one week by working with them to ensure filing compliance. How much money could you save? Whether you need help filing or double-checking your prepared returns, we encourage you to engage with an ACA expert – it could lead to significant cost savings.

Join Our Free ACA FAQs Webinar on February 15!

Hosted by Strategic HR’s ACA expert Mary Mitchell, Certified Healthcare Reform Specialist, this webinar will answer frequently asked questions and share the information employers need to know to set themselves up for reporting success. Sign up today!

Thank you to Mary Mitchell, MBA, SPHR, SHRM-SCP, Certified Healthcare Reform Specialist, and Heather Churchman for contributing to this week’s HR Question of the Week.

We understand that ACA compliance can be confusing, but don’t worry. Strategic HR has ACA experts who can help! Contact us to get a sense of where you stand, how we can lighten your load, and how we can help you avoid steep penalties from the IRS.