Sure, the Affordable Care Act (ACA) is over 10 years old, and, for the most part, the Employer Mandate (also known as Pay or Play or the Employer Shared Responsibility) is old news. However, there is a big change that may cause some growing pains for employers of all sizes, particularly those who offered a self-insured medical plan during 2023.
When we say “self-insured,” this includes employers sponsoring level-funded health plans, self-funded, partially self-funded, or ICHRAs (Individual Coverage HRAs) at any time during the prior year (2023).
Here, we will give you the long and short of what you need to know to have a successful 2024 ACA's Employer Mandate filing season
Laying the Foundation: Two Potential Penalties for Employers with a Filing Obligation.
There are two potential ways to trigger a penalty under the Internal Revenue Code (Code) each filing season. (There are two other penalties for Applicable Large Employers - ALEs - under Code 4980H, but that’s for a later discussion.)
1. Failure to File
Employers sponsoring a self-insured group health plan at any time during the prior calendar year have a filing obligation the following year - regardless of size!
The ACA added Code Section 6055, which requires every provider of minimum essential coverage to report information of covered individuals by filing information returns (Form 1095) with the IRS. Plan sponsors of self-insured plans are “providers of coverage.” While this has always been the case, we fear many non-ALE (under 50) employers sponsoring level-funded plans may find this to be new news to them.
Section 6056 requires ALEs file a more detailed Form 1095 (1095-C) specifying information about their offers of coverage to full-time employees and their dependents and the adequacy (affordable and/or minimum value) of that coverage.
The deadline to file is April 1, 2024.
2. Failure to Furnish
The deadline to furnish is March 1, 2024.
BIG Change! Mandatory E-Filing for (almost) All Employers Offering Self-Insured Plans.
Old 250-Return Threshold: Prior to this 2024 reporting season, employers could use paper filing with the IRS for up to 249 forms of a single type. Once there were 250 forms of the same type, the employer had to file electronically for that form type.
New 10-Return Threshold: Beginning this year, mandatory electronic filing (e-filing) is required for ten (10) or more returns of different types. The aggregate rule includes Forms W-2, 1099, 1094-B, 1094-C, 1095-B, and 1095-C as part of the 10-return threshold.
This is a major ACA compliance change especially for non-ALEs (those employers who had less than 50 full-time equivalent employees) who sponsor self-insured plans. With the popularity of level-funded plans in the small group market, many employers (and brokers) will be in shock to learn that they are (and have been) required to file Forms 1094-B and 1095-B (“B Forms”) with the IRS and must now do so electronically. Employers should check with their Third Party Vendor or TPA to see if they will be the reporting entity.
Failure to follow these electronic filing requirements comes with a hefty price tag! Generally, employers are subject to a penalty amount of $310 per Form unless reasonable cause can be established. The first 10 ACA forms filed by paper do not incur the penalty.
The deadline to electronically file with the IRS is April 1, 2024.
Filing electronically with the IRS is a process that takes time, a transmitter control code (TCC), and testing. We won’t bore you with the technicalities, but we do offer a solution.
Reminder: Automatic Extension to Furnish Forms.
In years prior to 2023, January 31 was the deadline to furnish Forms 1095 to individuals with the opportunity to file a request for a 30-day extension. Beginning with 2023, an automatic 30-day extension is granted for furnishing. With 2024 being a leap year, the deadline to furnish Forms 1095s to individuals is March 1, 2024.
Different Ways to Fulfill the Furnish Requirement.
Non-ALEs. With the individual mandate being $0, the IRS allows non-ALE employers to furnish Forms 1095-B by posting a clear and conspicuous Notice on its Home Page stating, “Tax Information” which links to a page that includes a statement in all caps, “IMPORTANT HEALTH COVERAGE TAX DOCUMENTS”, as an example. The Notice should state that individuals may receive a copy of their 1095 upon request and include the email address, the physical address, and phone number to the contact to whom the request must be made. The Notice must be posted by March 1, 2024, and must retain the website through October 15, 2024.
ALEs. Employers furnishing forms 1095-C to individuals must secure an affirmative consent to distribute in an electronic manner - either by website, portal, or email attachment. Importantly, this opt-in consent must be separate from the consent to receive plan information under ERISA. Also, the safe harbor for electronic distribution does not apply, as this is a tax document and not a health plan notice.
StanleyKup offers a sample affirmative consent for employers to tailor to meet their electronic distribution requirements for Form 1095-C.
Updates on ACA Penalties for Applicable Large Employers
The IRS recently released revised penalty amounts for the Affordable Care Act's Employer Shared Responsibility provisions for 2025. Commonly known as ACA Pay or Play Penalties, the IRS unveiled the adjusted amounts on February 12th 2024.
Employers with over 50 full-time equivalent employees (Applicable Large Employers (ALEs)) face potential penalties if they fail to offer adequate coverage. The adjusted penalties for 2025 have decreased slightly from the previous year.
Under section Section 4980H (a) the penalty is now $2900 compared to 2024’s $2970. This penalty is levied when an employer fails to provide group health coverage to a minimum of 95% of its full-time employees.
Under Section 4980H (b) the penalty will be $4350, compared to 2024’s $4460. This one is applied when an employer offers coverage that is either unaffordable or does not meet minimum value standards.
Employers must remain vigilant about ACA reporting requirements for the 2023 tax year, and it’s crucial for them to carefully assess their group health plan offerings for 2024 to avoid the penalties mentioned here.
The Remote Workforce: States with an Individual Mandate.
While the federal Individual Mandate is $0, several states continue to impose an Individual Mandate on their citizens. Employers with employee(s) who worked or resided in California, Rhode Island, New Jersey, Massachusetts, Vermont, or the District of Columbia at any time in 2023 may have a state filing and furnishing requirement. Most states use the same Form 1095 and require a filing with a state department, but Massachusetts uses its own Form 1099-HC. Filing deadlines vary by state.
StanleyKup Compliance has a Solution for ACA Reporting!
StanleyKup Compliance offers ACA and State Individual Mandate solutions! We work with employers of any size to ensure timely submissions and compliance with the new regulations.
For assistance reporting, filing, and distributing your Forms, simply visit https://www.stanleykup.com/aca-reporting