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How to Avoid ACA Filing Penalties

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Editor's Note: Since the publishing of this article, the IRS and U.S. Treasury extended reporting deadlines for ALEs furnishing and filing certain forms related to the ACA, including Form 1094-C and Form 1095-C. The new deadlines for employers to furnish Form 1095-C to employees is March 31, 2016The new deadlines for employers to file Form 1094-C and Form 1095-C are May 31, 2016 if filing by paper and June 30, 2016 if filing electronically. For more information, please read the IRS Notice 2016-4

how to avoid aca filing penaltiesDo you know how to avoid ACA filing penalties for your organization? If you're not addressing all factors that make up ACA compliance, you could have some of these penalties in your future. 

Maybe you have an employee-sponsored health plan, or you’ve tracked every employee’s time. Maybe you even offered full-time employees health coverage. But have you covered all your bases for ACA compliance?

Have you determined that your health plan is affordable? How do you report on that information anyway? What information do you need to provide your employees? When it comes to ACA compliance, there is a lot to cover—and a lot you could miss.

Download our free Essential Guide to ACA Compliance & Reporting.

Let's discuss some important ACA compliance questions and show you how to avoid ACA filing penalties.

How to Avoid ACA Filing Penalties


Report and Furnish Proper Forms with IRS (1094-C and 1095-C)

The ACA requires all ALEs to report health benefits coverage to the IRS with Form 1094-C and 1095-C. ALEs must furnish employees with a related statement of coverage using Form 1095-C. Employers must complete these forms for any employee who reached 130 hours in a month.

Furnish Form 1095-C to employees no later than February 1, 2016.

Any company who fails to file or furnish forms 1094-C and 1095-C by the deadline will face penalties. Form 1094-C is due on February 28 for forms reporting on the prior calendar year. But, in 2016, February 28 falls on a Sunday, so the Form 1094-c deadline is February 29, 2016 if filing on paper. If filing electronically, the Form 1094-C due date is March 31, 2016. The same deadlines apply to Form 1095-C as Form 1094-C deadlines.

The deadline to file Form 1094-C with the IRS is February 29, 2016 (paper) or March 31, 2016 (electronically).

Failure to file complete and accurate Forms 1094-C by the form due date will result in penalties equal to $250 per form, not to exceed $3 million per year. Failure to file and furnish correct information on Form 1095-C could result in a $500 per form penalty for employers.


How to Avoid ACA Penalties with Forms 1094-C and 1095-C for 2015

  • Pay attention to the 1094-C instructions. Don't complete these complicated forms the right way, and you could pay.
  • File and furnish forms in the correct fashion. ALEs filing 250 or more Forms 1094-C or Forms 1095-C must file through electronic delivery. Employers must mail or hand-deliver Form 1095-C to employees unless the employee has given specific consent for electronic delivery.
  • File forms by the correct due date or file for an extension with Form 8809.
  • Make a “good faith effort.” In 2016, the IRS will not penalize organizations that have made a “good faith effort” to follow reporting requirements.


ACA Safe Harbors for Affordable Plans

The ACA not only requires ALEs to offer health coverage to full-time equivalent employees, but also requires that health plan be affordable with at least 60% minimum value. According to the ACA, an “affordable” plan is one that costs no more than 9.5% of an employee’s total household income. It is unlikely that an employer will know each employee’s total household income. Use ACA safe harbors to determine plan affordability.


Determine Health Plan Affordability Using Safe Harbors

When determining health plan affordability offered to employees, employees should consider these safe harbors. The cost of the health plan may not exceed 9.5% of any one the following (for employee-only plans):

  • W-2 Income: See the employee’s current year’s wages in Box 1 on the employee’s W-2.
  • Rate of Pay: Employers may also take the amount equal to an employee’s hourly rate and multiply by 130 hours per month for hourly employees.
  • Federal Poverty Level: employers may use the FPL in effect six months before the beginning of the plan year.

The intricacies and requirements of the ACA and the Employer Mandate can be overwhelming. Don’t ignore these important components of ACA compliance—or be ready to pay up.

Having the right tools to track and report on ACA compliance for your business is a necessity. Know your business is ACA compliant and penalty free. Use an ACA module that includes 1094-C and 1095-C software for accuracy and efficiency.


Download the Essential Guide to  ACA Compliance & Reporting