Affordable Care Act (ACA) Reporting to the IRS

ACA Reporting to IRS

NOW is the time to focus on 2019 ACA reporting for the IRS

The Affordable Care Act was passed in 2010, and the general idea behind it was to make healthcare a lot more affordable and available to a lot more people. Presently, the Affordable Care Act or ACA includes a wide range of regulations that affect not only individuals, but also insurance companies, healthcare providers as well as employers, on whom the impact is minimal. The continuous conversation & legal cases surrounding the ACA often has employers asking : will it stay or go? As it relates to US employers & payroll professionals – the ACA remained in force for 2018 & remains intact for 2019. That means you need to be on top of the ACA reporting to the IRS.

Employers need to offer the extension of parental insurance to children, up to the age of 26, protection against pre-existing conditions of a medical nature as well as ending annual and lifetime limits on health benefits. Employers might also need to handle insurance policies that cover preventive care issues, such as cholesterol, vaccines and depression screenings. In most cases, employers are like the middle men between the actual health care providers and the employees. 

Since 2017, there have been a number of changes in ACA and experts predict that there will be several more changes in the days to come. The way in which ACA exists as of now, there are two major provisions – the shared responsibility provisions and minimum essential coverage, but not all employers come under the purview of ACA, which brings up the next question – do you come under ACA norms?

Important ACA Deadlines:

1095-Cs need to be provided to employees by January 31, 2020 (This is an extended deadline).

Forms 1094-C & copies of the 1095-Cs need to be filed with the IRS

Paper filing needs to be done by February 28, 2020


Electronic filing (required for employers with more than 250 1095-Cs) must happen by March 31, 2020.

According to ACA regulations, Applicable Large Employers or ALE’s need to be in compliance and these are companies that have 50 or more full time employees. All ALE’s have an important responsibility to provide the requisite information to the IRS – this means that they need to give the information about how many employees are covered and what kind of coverage is being offered to them. There are two forms for these purposes:

  • Form 1094-C – This form is to be used to report all the coverages, including information about the business, whether the business functions under a larger ALE group, how many employees are a part of the organisation, each month of the year, and whether any minimum essential coverage was offered during each month. 
  • Form 1095-C – This is a form that needs to be completed by all the full-time employees and all the information that is shared with these employees, also needs to be shared with IRS. This is required regardless of whether the employee used the coverage and even when coverage was never offered.

 In case the employer is handling healthcare on their own, then they will need to fill forms 1094-B and 1095-B. Alternately, they could use 1094-C and 1095-C, and add in all the extra information in these forms itself. And if you are filing 250 or more returns, then you will have to do it through the ACA Information Return System electronically. Till 2017, the deadline for furnishing all details of 1095-C was January 31st, but as of 2018, the date has been extended to March 2nd. For 1094-C and 1095-C, the filing must be completed by February 28th if being done on paper and March 31st, when done electronically. 

How do you calculate your full time employees:

Rather than calculating who does come under the ACA purview, it would be easier to calculate who does not:

  • Any employee who is hired seasonally and has worked for the employer for less than 120 days (unless the employee is eligible for Seasonal Worker Exception)
  • Any employee who is working from another country or an American territory that does not come under the purview of this calculation. 
  • Any employee who received healthcare through the military (in the form of VA or TRICARE)
  • Any volunteer working at a government or non-profit organisation
  • Any work-study student employee, who is working/participating in federal or state related programs. 

Now, it will be easier to calculate the actual number of full time employees and then you need to take into consideration the following factors:

  • Calculate your full time employees in a month – this would mean any employees who have worked for an average of 30 hours or more a week or 130 hours or more a month. 
  • Calculate the number of employees who are paid for lesser than the 30/130 hour mark and total the number of the hours these employees were paid for, in the said month, up to a total of 120 hours per employee. The number you get needs to be divided by 120 and that should give you your final number. 
  • Once you add the first set of numbers and the second, you will have your number of full time equivalent employees for that particular month. 

But because a business can change size at any time (addition or removal of employees), the ALE status is decided on an annual basis. This is why, all calculations need to be made on a monthly basis and the total calculation will have to be divided by 12 to get the final number. In the case the number is 50 or more, you would be considered an ALE; if not, then you will not come under the ACA requirements. 

If you have started your business only this year, you will be exempt, because IRS is considerate about new businesses in the first year. The calculations will also change if there are multiple businesses being run under the same ownership. 

References for ACA reporting to the IRS

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