Get Ready for 2023 ACA Reporting

The Affordable Care Act’s Employer Shared Responsibility rules compel Applicable Large Employers (ALEs) to offer qualified, affordable health coverage to full-time employees or risk penalty exposure. In addition, ALEs are required to provide annual reporting to the IRS and to their employees via Forms 1094-C and 1095-C. Non-ALEs who sponsor self-insured medical plans must provide similar information using Forms 1094-B and 1095-B. Failure to file and furnish these forms can result in sizable penalties for each year the reporting is not adequately completed. 

The IRS recently released updated forms that plan sponsors should use for 2023 reporting. The forms and draft instructions remain largely unchanged from the prior year, but new regulations issued earlier this year have a significant impact on employers who file fewer than 250 forms and have filed paper forms in the past.

Updated Electronic Filing Requirements

Currently, electronic filing is required for employers that file at least 250 returns during the calendar year, with each type of information return counted separately. For example, an employer that files 140 Forms W-2 and 130 Forms 1095-C for a given year is not required to file electronically under the current rules because it files fewer than 250 of each form.

Under the new rule, for information returns being filed after December 31, 2023, the threshold for required electronic filing decreases significantly, to just 10 returns. The new rule also changes the counting method, such that employers must aggregate all specified information returns to determine whether they meet the 10-return threshold. This means that an employer who previously filed 325 Forms W-2 electronically (because it exceeded the 250-form threshold) and 225 Forms 1095-C on paper (because it fell below the 250-form threshold) will be required to file both forms electronically.

The returns that generally create the largest number of forms and that will most likely cause an employer to meet the threshold are:

• Form W-2 – used to report wage and tax information

• Forms 1094-B and 1095-B – used by employers with fewer than 50 full-time employees who sponsor a self-insured medical plan

• Forms 1094-C and 1095-C – used by Applicable Large Employers (ALEs) to report information about the health coverage offered to their employees

• Form 1099 series – used to report non-salary income to the IRS

This rule change will affect ALEs with 50-249 employees and smaller employers who sponsor self-insured medical plans, as those employers have been allowed to file paper forms in the past. The electronic filing process is complex, and most employers choose to contract with a third-party service provider to complete their forms and submit them electronically. Affected employers that have historically filed on paper should work with their payroll vendor, reporting vendor, and/or benefit advisor now to transition to electronic filing for the 2023 reporting cycle.

Reporting Due Dates and Penalties

For the 2023 reporting cycle, the deadline to furnish Forms 1095-B or -C to employees is March 1, 2024, due to the leap year. The deadline to furnish these forms to employee in non-leap years is March 2nd.

Electronic filings to the IRS are due by March 31 each year. However, since that date falls on a Sunday, these electronic returns are due on the next business day, April 1, 2024. Paper returns filed via mail – an option available only to small, self-funded employers filing fewer than 10 forms – are due to the IRS by February 28, 2024.

Penalties for failure to timely file or for filing inaccurate information are steep, ranging from $50 per form for forms filed within 30 days of the deadline up to $310 per form if they are filed after August 1, 2024. Separate penalties apply to a failure to file with the IRS and a failure to furnish forms to employees as required.

With just a few weeks left in 2023, employers should begin preparing for the filing deadlines. Plan sponsors who are not confident they have a strong reporting vendor to help them through this process should work with their benefit advisor for assistance in finding a reliable, experienced reporting partner and move quickly to secure these services. Employers should be sure they and their reporting vendors allocate necessary resources to complete this project after the busy holiday and year-end season.