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ACA Reporting Compliance for Employers

Published: February 28, 2023 by Janet Andrews

Since it was enacted, the Affordable Care Act (ACA) has been an essential part of employer reporting. ACA reporting compliance has become a fixture of the tax filing season with forms such as the 1095-C. The passage of the Tax Cuts and Jobs Act of 2017 triggered an important change in ACA: the removal of the penalty for not having health insurance.

In response, states have begun implementing their own mandates to control health care costs. Rhode Island, New Jersey, California, Massachusetts, Vermont and the District of Columbia have enacted state-level ACA reporting, with more on the way. This development leaves employers needing to monitor state-level ACA developments as they do for state and local tax withholding regulations today.

Here’s a run-down of what you need to know by state for ACA compliance requirements.

Rhode Island

Employers were required to report coverage information for their employees residing in Rhode Island annually beginning in 2021, unless the employer’s insurer completes the reporting requirement.

  • The federal forms are sufficient to meet the Rhode Island reporting requirement.
  • The Division of Taxation provides a webpage where employers can upload file(s). A link to this webpage is available on the Division of Taxation’s website.
  • The state reporting deadline for Rhode Island has been extended to Mar. 31.

New Jersey

New Jersey’s individual mandate law took effect on January 1, 2019. Like the original ACA mandate, it requires that everyone in the state to maintain qualifying coverage (officially known as minimum essential coverage) or face a tax penalty. For adults, the penalty started at either $695 or 2.5% of annual income, whichever is higher.

Employers with 50 or more employees who employ N.J. residents now must electronically report on their compliance with the New Jersey Health Insurance Market Preservation Act by:

  • Submitting 1095 forms through the MFT Secure Services in a file based on the IRS XML schemas, paper filing will not be accepted.
  • Deferring to New Jersey’s own forms if those federal forms are ever discontinued.
  • Completing their electronic filings by March 31.

Employers with less than 50 forms must file using the Form NJ-1095.

These are new requirements, on top of existing reporting responsibilities to the federal government.

Both New Jersey-based and out-of-state employers with employees in New Jersey must comply with the state mandate. According to the state’s official guidance, the provisions of the New Jersey Health Insurance Market Preservation Act provisions are not limited only to those employers who withhold New Jersey payroll taxes.

California

California passed an individual mandate (California Mandate) that required residents to maintain minimum essential coverage (MEC) starting Jan. 1, 2020.

  • To complete the California Mandate reporting, self-insured employers, regardless of their Applicable Large Employer (ALE) status, must transmit 1094/5-B and C forms to the California Franchise Tax Board (FTB) by March 31. However, California has stated a penalty will not apply if the return is filed on or before May 31.
  • If an employer has 250 or less forms to report to California, employers can print and mail the same1094/5-B or C forms that they transmitted to the IRS for ACA reporting to complete their California Mandate reporting.
  • If an organization files more than 250 forms, it must file electronically. You can register at any time to submit reporting electronically.
  • To electronically transmit forms to the state of California, besides registering, you must undergo a testing cycle before being approved to transmit your final data. For TY2022, transmitters who have already tested with California do not need to retest again to obtain a new production code for transmitting data. California production codes will automatically be extended.
  • Fully insured employers are not required to submit California Mandate reporting as long as their insurer reports to the FTB, which they are required to do.
  • All employers must provide 1095-B and C forms to their employees by Jan. 31 following the end of the plan year, which is already required under ACA. While the federal ACA deadline is frequently extended past Jan. 31, the California Mandate distribution deadline will not automatically be extended to mirror the federal deadline.

You must work closely with your ACA reporting vendor to ensure that forms are distributed in the correct format and on time. Employers who fail to submit reporting as required are subject to a $50 penalty per individual.

Massachusetts

Employers with operations do not need employee-level details in their state level filings like is necessary in annual ACA submissions to the IRS. Massachusetts’s mandate requires employers to file by Dec. 15 of the reporting year. Employers must also issue Form 1099-HC to their employees and report information to the state Department of Revenue. Failing to comply with 1099-HC requirements could be subject to a penalty of $50 per employee, with a maximum of $50,000.

Vermont

As of 2021, Vermont will only have new coverage reporting obligations to the state if federal ACA reporting requirements are eliminated.

The District of Columbia

The District of Columbia (D.C.) has enacted legislation similar to New Jersey’s, requiring its residents to carry a minimum level of coverage (or obtain an exemption) or face a penalty. The law in question, the Individual Taxpayer Health Insurance Responsibility Requirement Amendment Act of 2018, is effective for tax years ending on or after Dec. 31, 2019.

  • Under this statute, all “applicable entities’ under this statute must report their compliance information to the district’s Office of Tax and Revenue (OTR). The definition of an applicable entity includes any employer or employment-based health plan sponsor with at least 50 employees. Plus, one or more employees must be of based in D.C. Providers of minimum essential coverage and insurance carriers/issuers are also applicable entities.
  • For purposes of determining someone’s residency in D.C., the OTR considers any employee who had taxes withheld and remitted to D.C. during the applicable calendar year a resident. Minimum essential coverage providers should also consider any individual with a home or mailing address in D.C. as a resident.
  • The OTR accepts the same IRS forms but instead of an XML format the electronic file must be a piped delimited text (.txt) file, with submissions going exclusively through the MyTax.DC.gov domain.
  • Like NJ, D.C. will also not be accepting paper filing. All forms must be filed electronically.
  • The D.C. deadline for tax year 2023 is May 1, since April 30 falls on a weekend.

Where is state-level ACA reporting headed in the future?

These states and the District of Columbia participate in a larger movement toward state-level reporting on health insurance. More states will likely follow suit eventually, and employers must be prepared.

Effectively managing these ongoing changes requires automated and scalable ACA reporting for compliance. Since laws are being passed and updated by state legislatures all the time, it can be costly and time-consuming to keep up with everything that’s going on.

Experian Employer Services automatically monitors and updates state-level reporting requirements, so employers are never in the dark about their compliance obligations. We incorporated Rhode Island, New Jersey, D.C. and California reporting requirements into our service for the 2021 tax year and have made it easy to add more states in the future.

Stay tuned to our blog for the latest news and updates.

ACA Reporting Compliance for Employers FAQs

What Is ACA Reporting Compliance?

The Affordable Care Act is a health care reform law put in place to provide health insurance coverage for the uninsured, reduce health care costs, expand insurance access and increase consumer protections. But what is ACA compliance reporting? ACA reporting compliance for employers ensures employers must provide affordable health insurance coverage to at least 95% of their full-time workforce and their dependents. Affordable Care Act compliance also requires employers to provide employees a notice of coverage along with additional available benefits, Form 1095-C and a Summary of Benefits and Coverage.

Why Is ACA Reporting Compliance Important?

Abiding by ACA compliance requirements is essential for employers, as noncompliance can result in expensive penalties that can dig into your bottom line and tarnish your company’s reputation if you fail to comply with federal regulations. With that said, ACA employer reporting is important because it ensures you abide by the law and satisfy your duty of providing affordable health care coverage to your employees.

What Are the ACA Requirements for Employers?

There are a few key ACA compliance requirements employers need to abide by. To ensure ACA reporting compliance for employers, follow these requirements:

  • Generally, applicable large employers (ALEs) with 50 or more full-time employees will need to offer affordable health insurance with a minimum value to at least 95% of their full-time staff and dependents.
  • For an employer-sponsored health care plan to be deemed affordable, employee costs can’t exceed a certain percentage of their household income.
  • Employers must file Form 1095-C annually to the IRS and provide a copy to their employees.
  • Employers must also file Form 1094-C, which only goes to the IRS.

When Are Employers Required to Report ACA Compliance?

To remain compliant with the IRS, employers must report their ACA compliance annually using forms 1094-C and 1095-C. For 2023, employers must file paper Forms 1094-C and 1095-C with the IRS by Feb. 28 or electronically by March 31. Employers must also send Forms 1095-C to employees by March 2, 2023. The Internal Revenue Service (IRS) released final regulations on February 21, 2023 requiring organizations to electronically file specified returns and other documents.  (This includes 1094-C and 1095-C forms.)

How Can Small Businesses Meet the ACA Reporting Requirements?

Small businesses are those with fewer than 50 full-time employees. They can meet ACA compliance requirements by enrolling in the Small Business Health Options Program (SHOP) through a private insurance company or with the help of a broker or agent. ACA reporting compliance for employers with fewer than 50 employees requires them to provide information about the Marketplace to their employees, regardless of whether they plan on offering health insurance.

How Can Large Businesses Meet the ACA Reporting Requirements?

Applicable large employers (ALEs) are those with 50 or more employees. They can meet the ACA compliance requirements by providing affordable health care coverage to at least 95% of their full-time employees and their dependents.

What Are the Consequences for Noncompliance With ACA Reporting Compliance?

There are several penalties employers can face for noncompliance with ACA reporting. For example, employers with 50 or more employees who fail to provide 95% coverage to their full-time workforce can face a penalty of $2,880 in 2023. To avoid penalties, you can use ACA reporting software that automates ACA reporting to help reduce errors and prevent missed deadlines. Contact us today to learn more about Experian Employer Services’ ACA employer reporting solution.

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