This guide contains instructions, examples, and practical hints employers can use to comply with the Affordable Care Act (ACA) employer reporting requirements and is designed to assist employer plan sponsors in understanding those requirements.

Many employers will use a third-party vendor such as a benefits administration provider, payroll vendor, or HRIS system to assist with reporting requirements. The problem many employers face is that in most cases, no single vendor or system contains all the information necessary to complete the reporting. Therefore, it may be necessary to share information between systems or to import data into the system chosen to track information for reporting purposes. Whatever method or system the employer uses to handle the reporting, it is important for employers to track necessary information throughout the year.

To help employers understand the reporting process at a higher level, we have intentionally omitted some of the more specific rules that apply to various situations. The IRS has published detailed line-by-line instructions for all versions of Forms 1094 and 1095. Employers should use this guide as a companion to the official IRS instructions, which should be consulted for more information regarding specific reporting details.

Employers may find it useful to have a copy of the IRS instructions and copies of the actual 1094-C and 1095-C for reference purposes when reviewing this guide.

The latest versions, instructions, and additional information can be found on the IRS website at:

ACA Employer Reporting Basics

Certain employers, plan sponsors, and insurers are required to report health plan information and participant coverage data to the IRS. The IRS uses this information to administer and regulate various aspects of the ACA, including an individual’s eligibility for a premium tax credit when purchasing health insurance through a public Marketplace and the §4980H employer shared responsibility rules.

Who Must Report?

Applicable Large Employers (ALEs)

All ALEs (those with at least 50 full-time equivalents (FTEs)) are required to report offer of coverage information for full-time employees. In addition, ALEs who sponsor self-funded group health plans are subject to individual participant coverage reporting. When multiple employers are part of an aggregated employer group (according to §414 Controlled Group and Affiliated Service Group rules), ALE status is based on the total number of FTEs across all employers who are members of the aggregated group. Each employer who is a member of an aggregated ALE group with 50 or more FTEs must report even if the member employer would not be considered an ALE on its own.

Employers Offering Self-Funded Group Health Plan Coverage

Small employers who do not meet the definition of an ALE (and who are not part of an aggregated ALE group) must report participant coverage information to the IRS if they sponsor a self-funded or level-funded group health plan. However, small employers who offer only fully-insured plans, or no coverage at all, are not subject to the reporting requirements. Health insurance companies will report individual participant coverage details to the IRS for fully-insured plans.

***Level-funded or partially self-funded plans are treated as self-funded for reporting purposes. Employers offering such plans should assume that coverage reporting is required unless the carrier specifically promises to handle it on behalf of the plan.

Timing of Reporting

Employer reporting is required annually and is done early in the year for the previous calendar year. Reporting is always based on calendar year data (even for employers with a non-calendar year medical plan). Annual employer returns must be submitted electronically to the IRS by March 31, 2026. An extension of 30 days is available if the employer requests an extension by filing Form 8809 on or before the normal filing deadline.

Corresponding employee and participant statements must be provided by March 2, 2026. Form 1095 can be provided by hand delivery, by mail, or electronically if consent is obtained from the individual to receive the 1095 electronically. In addition, the distribution requirement can be satisfied by providing a “clear, conspicuous and accessible notice” that the forms are available upon request.

Electronic Filing Requirements

Employers who file 10 or more tax forms must file the returns electronically. The count includes not only Form 1094-C and Form 1095-Cs, but also any other information tax returns the employer may file during the year (e.g., 1099 series, W-2s); therefore, almost all employers are required to file the returns electronically. This is also true for any corrections that may need to be filed. The IRS developed Pub. 5165, Affordable Care Act (ACA) Information Returns (AIR) Guide for Software Developers and Transmitters, which outlines the communication procedures, transmission formats, business rules, and validation procedures for returns filed electronically. Most employers do not directly file electronically with the IRS themselves and instead use the services of a vendor or reporting software that handles the electronic transmittal to the IRS on their behalf.

Form 1095 Distribution (New for 2024 Reporting)

Beginning with the reporting due in early 2025, employers can meet Form 1095 distribution requirements by posting a notice of availability and then only distributing Form 1095s upon request. The notice must include an email address, physical address, and telephone number that can be used to request a copy of Form 1095. Notice must be posted on the employer’s public-facing website so that it is accessible to all possible Form 1095 recipients. The notice must be posted by March 2 and remain posted through October 15. If a Form 1095 is requested, it must be provided within 30 days and would have to be hand delivered or mailed unless the employer obtains consent to provide Form 1095 electronically.

NOTE: For employers subject to state-level reporting requirements in CA, MA, NJ, RI or DC, actual distribution via hand delivery, mail or electronic means may still be required unless the states adopt the federal approach.

Format for Reporting

In general, the reporting process works in much the same way as current W-2 reporting. A Form 1095-C or 1095-B is prepared for each full-time employee and/or covered participant to send to the IRS, with a copy provided to the employee/participant. The exact information required to be provided to the IRS depends on several factors, including whether the employer plan is self-funded or fully-insured.

In addition to providing a Form 1095 for each full-time employee and covered individual, or least posting notice of availability upon request, employers must file with the IRS at least one Form 1094-C or 1094-B that provides summary employer and plan information (i.e., a cover sheet or transmittal form to accompany all of the Form 1095s).

The following table outlines which parts of each form apply based on the size of employer and the plans offered. Note that an ALE who offers both a fully-insured and a self-funded plan to employees will complete different portions of the 1095-C depending on which plan the individual selected.

ALE Offering a Fully-Insured Plan	ALE Offering a Self-Funded Plan
Form 1094-C (all parts) Form 1095-C (Parts I and II) · Part I – Employee & Employer Info · Part II – Offer of Coverage Info *Insurance carrier will report coverage information for the fully-insured plan on “B” forms	Form 1094-C (all parts) Form 1095-C (Parts I, II and III) · Part I – Employee & Employer Info · Part II – Offer of Coverage Info · Part III – Covered Individual Info
Small Employer Offering a Fully-Insured Plan	Small Employer Offering a Self-Funded Plan
No reporting required by the employer *Insurance carrier will report coverage information for the fully-insured plan on “B” forms	Form 1094-B Form 1095-B (Parts I, III and IV)

Consequences for Failure to Report

The 2025 penalty for failure to file, filing late, or filing incorrect information with the IRS is $340 per form up to $4,089,500. The penalty may double if there is also a failure to provide copies of Form 1095s to full-time employees and covered individuals. The penalty is reduced to $60 per form if correct forms are submitted within 30 days of the reporting deadline, and $130 per form if correct forms are submitted by August 1 of the year in which the filing is due.

There was previously forgiveness available to those who made mistakes (e.g., inaccurate or incomplete reporting) if it was clear that a good faith effort was made to comply. This relief is no longer available, so employers should make sure the reporting is as complete and accurate as possible.

State Coverage Reporting

A handful of states (CA, MA, NJ and RI) and D.C. have individual coverage mandates requiring residents to have minimum essential coverage or to pay a state tax penalty. To enforce these mandates, these states require group health plans, both fully-insured and self-funded, to report coverage information to the states. Employers offering group health plans with covered individuals residing in such states may be required to send in reporting to the state tax department in addition to the coverage information submitted to the IRS. See more detail in Appendix A.

Understanding Form 1094

Overview

Employers are required to submit at least one Form 1094 when sending Form 1095s to the IRS for all full-time employees and covered individuals. It may be helpful to think of Form 1094 as the “cover sheet” to the Form 1095s the employer is submitting to the IRS. Form 1094-C is used by ALEs to report summary information to the IRS and to transmit the employer’s Form 1095-Cs to the IRS. The simpler Form 1094-B is generally used by small employers (who are not ALEs) who sponsor a self-funded group health plan. This guide does not specifically address Form 1094-B.

Form 1094-C Parts

Form 1094-C has four parts that must be completed by the employer.

Part I

Basic employer information, including name, EIN number, address, contact information, etc.

Part II

Additional information on the employer, including:

Total number of Form 1095s filed on behalf of the employer (Line 20);
Indication of whether the employer is part of an aggregated ALE group based on §414 Controlled Group and Affiliated Service Group rules (Line 21); and
Certification by the employer that it met certain offer requirements (Line 22). The employer can check any box that applies but is not required to check any of the boxes. Checking one or more boxes allows the employer to take advantage of simplified reporting methods. Box A indicates the employer meets the requirements for the “qualifying offer method”. Box D indicates the employer meets the requirements for the “98% offer method”. Boxes B and C are reserved and not used for 2025 reporting.

Box A – Qualifying Offer Method

The employer can use the qualifying offer method if the employer made a qualifying offer of coverage to one or more full-time employees for all months during the year in which the employee was a full-time employee to whom a §4980H penalty could apply. A “qualifying offer” is made when an employer offers a minimum value plan to a full-time employee at a cost for single coverage of less than 9.5% (indexed annually—9.02% in 2025) of FPL, approximately $113/month in 2025, and offers at least minimum essential coverage (MEC) to spouses and children. Use of this method:

· Allows the employer to use code 1A on Line 14 and to skip completing Line 15. Completion of Line 16 is optional.

· Allows the employer to use a simplified alternative statement for any employees that received a qualifying offer for all 12 months (instead of a copy of Form 1095-C) so long as they were not enrolled in a self-funded plan. However, even if the employer meets this requirement, the employer must still provide a Form 1095 to the IRS and cannot use it for those who enrolled in the employer’s self-funded plan, so it is likely easier for employers to provide a copy of Form 1095 to all applicable employees.

Box D – 98% Offer Method

The employer offered a minimum value plan to at least 98% of employees for whom a Form 1095-C is being filed that was affordable based on any of the affordability safe harbors (i.e., Form W-2, rate of pay, or FPL), and at least MEC was offered to the employees’ dependents. Use of this method:

· Allows the employer to skip providing full-time employee counts in Part III, column (b) of Form 1094-C.

· Allows the employer to report on all employees receiving a Form 1095-C without designating who is full-time and who is part-time (advantageous for employers who offer coverage to part-time employees). A Form 1095-C is still required for any employee who met the definition of full-time, so an employer should verify for any employee that is not receiving a Form 1095-C that the employee was truly part-time.

Part III

This section is used to report aggregate employer information for each month of the calendar year, including:

Column (a) – Whether the employer offered MEC to substantially all (i.e., 95%, or all but 5, if greater) full-time employees and their dependents (children) for each month in the calendar year. If Column (a) does not have “yes” marked for all 12 months, the IRS may assess a §4980H(a) penalty if any full-time employee received a premium tax credit toward individual Marketplace coverage.
Column (b) – The total number of full-time employees for each month. The number of full-time employees will depend on the method the employer uses to define “full-time” for §4980H purposes. In general, §4980H defines a full-time employee as an employee with at least 130 hours of service in a month, but employers may also choose to use the look-back measurement method, averaging hours of service over 3-12 months. NOTE: Employees in a limited non-assessment period (e.g., waiting period or initial measurement period) do not count as full-time employees.
Column (c) – Total employees (both full-time and part-time) employed for each month. The employer may pick either the first or the last day of the month, the first or the last day of the first payroll period for the month, or the 12th day of the month to report total employees.
Column (d) – An indication of whether the employer was part of an aggregated ALE group based on the §414 Controlled Group and Affiliated Service Group rules for each month. This needs to be completed only if the employer marked “yes” on Line 21.
Column (e) – Reserved (not used for 2025 reporting).

Part IV

An employer who is part of an aggregated ALE group must list other employer members of the group in Part IV (name and EIN). Only ALE members with at least 1 full-time employee must be listed. ALEs that are not part of a larger aggregated ALE group should leave Part IV blank.

Other 1094-C Reporting Issues

Most often, employers will provide the IRS with a single Form 1094 in conjunction with all Form 1095s, but an employer could attach multiple Form 1094s – for example, for each department or division. If separate Form 1094s are submitted with the 1095s, the employer must identify one Form 1094 as the employer’s “authoritative transmittal” on Line 19 and provide the total count of Form 1095s on Line 20. Parts II, III, and IV of Form 1094 are completed only on the authoritative transmittal.
Each employer (each EIN) who is a member of an aggregated ALE group is responsible for submitting a separate Form 1094 authoritative transmittal and reporting for the employees of that member employer. In addition, when determining whether coverage was offered to at least 95% of full-time employees and dependents for each month, the determination is made separately for each employer (not for the aggregated ALE group combined).

Understanding Form 1095

Overview

ALEs must provide a Form 1095 to any employee who was employed full-time for any month during the calendar year. A Form 1095 must also be provided to any individual (including non-employees) who participated in a self-funded group health plan during the year. For employees who are part-time all year and not covered under a self-funded plan, no reporting is required.

Form 1095-C is used by ALEs for all full-time employees and for any non-full-time employee or non-employee covered by an ALE’s self-funded plan.

Form 1095-B is used by small (non-ALE) employers who sponsor self-funded plans and can optionally be used by ALEs to report for non-employees (such as retirees, COBRA participants, non-employee owners or board members, etc.) covered by the ALE’s self-funded plan.

ALEs use Form 1095-C for most reporting purposes, so this guide will focus on Form 1095-C requirements. ALEs who choose to use Form 1095-B for non-employees with self-funded coverage and small employers with self-funded plans should refer to IRS Form 1095-B instructions.

TIP: Determining Full-Time Employee Status

To understand which employees require offer of coverage reporting in Part II of Form 1095-C, the employer must determine which employees were full-time for each month. Below are several tips to assist in this determination:

· Make sure to count all hours of service, which include any time paid or payable with U.S.-source income, including vacation, sick time and paid time off.

· ALEs must choose a measurement method (monthly or look-back) and use it consistently. The rules only permit differentiating the measurement method for the following categories: (i) hourly and salaried; (ii) union and non-union; (iii) different geographic locations; or (iv) different entities within the same aggregated ALE group.

o Under the monthly measurement method, employees with 130 or more hours of service in a month are full-time.

o Under the look-back measurement method, employees who averaged full-time hours during the previous measurement period are generally full-time for the corresponding stability period, even if there is a reduction in hours or leave of absence. There is a small exception beginning the 4th month following a change to part-time status for regular full-time employees meeting certain criteria.

· The break in service rules, which apply for both measurement methods, require that employees returning from a break in service of <13 weeks (<26 weeks for educational organizations) be treated as continuing employees and not subject to a new waiting period or initial measurement period.

· For aggregate ALE groups, any employees averaging 30 or more hours per week across the entities are considered full-time. For reporting, the entity that employed the employee for the most hours in any month should report the employee as full-time for that month. So, for example, if the employee primarily works at one entity, but puts in a few hours each month at another entity, the employee would be claimed and reported by just the one entity. However, if the employee moves amongst the entities, the entity reporting the employee as full-time may vary from month-to-month.

Form 1095-C Parts

Form 1095-C contains three parts, but not all employers must complete all three parts. The specific information required depends on whether the plan is fully-insured or self-funded.

ALEs who sponsor fully-insured plans must complete Parts I & II of Form 1095-C but are not required to complete Part III (which details the coverage provided on a monthly basis). The carrier providing the fully-insured coverage will submit a separate Form 1095-B to the IRS for any individuals covered under the fully-insured plan and provide a copy of the 1095-B to covered individuals.

ALEs who sponsor self-funded plans are required to fill out Parts I & II for all full-time employees, and all three parts (I, II, and III) of Form 1095-C for individuals covered by a self-funded plan.

ALEs who sponsor both fully-insured and self-funded plans are required to fill out Parts I & II of Form 1095-C for all full-time employees, and Part III only for individuals covered by a self-funded plan.

1095-C Part I

Much of the information required in Part I of Form 1095-C is basic employer and employee information such as address, contact information, EIN, etc., and it is not difficult for employers to complete this section.

1095-C Part II (Lines 14 – 17)

Part II is more challenging for many employers in that it requires employers (or their vendors) to develop the systems and processes necessary to keep track of employee-related information on a month-by-month basis. In addition to the details for each line provided below, see Appendix B for a variety of coding examples based on some of the most common reporting scenarios.

Employee Age & Plan Start Month

There is a box in the beginning of Part II that asks for the employee’s age as of January 1 and for the plan start month.

Reporting of the employee’s age is required only if the employee was offered an individual coverage HRA (ICHRA). If the employee was offered an ICHRA, enter the employee’s age as of January 1, 2025.
The plan start month for the employer’s group health plan must be reported on all Form 1095-Cs. The plan start month should reflect the beginning of the employer’s group medical plan year, not necessarily the first month the employee was offered coverage.

Line 14 – Offer of Coverage

Employers must use one of the IRS defined codes to report on Line 14 the type of offer made to the employee. There must be a code for each of the 12 months regardless of whether the individual was employed for all 12 months or was offered coverage. If one code applies for the entire 12 months, the code may be entered once in the “all 12 months” column; alternatively, the code can be entered in the column for each of the 12 months separately. Nothing on Line 14 signifies whether an employee elected coverage. This line represents only whether an offer of coverage was made.

Offer of Coverage Tips

· Most employers will only use two offer codes – 1H for the months coverage was not offered, and 1__ (the code that describes the employer’s offer of coverage) for the months that coverage was offered. The offer code does not vary based on whether the employee has a spouse or dependents or which tier of coverage the employee enrolled in.

· An offer of coverage is valid for the month only if coverage was available every day during that month, so a month that an employee was eligible for only a portion of the month should be coded with 1H. Similarly, an employee in a waiting period or initial measurement period is not treated as being offered coverage and should be coded with 1H for such months.

· An offer of coverage that is waived may be treated as an offer of coverage for up to 12 months. Employees who waived at open enrollment, or when first eligible during the plan year, may generally be treated as having been offered coverage for the whole plan year.

· An offer of COBRA is treated as an offer of coverage if the employee is still employed. For example, employees who were offered COBRA following a reduction in hours may be treated as having been offered coverage for the remainder of that plan year. However, the offer code should reflect only the individuals who were offered COBRA.

The following chart lists the available codes. Codes 1L – 1U are for an individual coverage HRA (ICHRA).

Code	Description
1A	Qualifying Offer of Coverage – Offer of MV coverage to Employee at a cost for single coverage of less than 9.02% (in 2025) of FPL, and at least MEC offered to Spouse and Children
1B	Offer of MV coverage to Employee only
1C	Offer of MV coverage to Employee + at least MEC offered to Dependent (but not Spouse)
1D	Offer of MV coverage to Employee + at least MEC offered to Spouse (but not Dependents)
1E	MV coverage offered to Employee + at least MEC offered to Spouse & Dependents
1F	MEC that is not MV offered to Employee
1G	Self-funded plan offered to part-time Employee or Non-Employee
1H	No offer of coverage
1I	Reserved
1J	Offer of MV to Employee + at least MEC conditionally offered to Spouse (but not Dependents)
1K	Offer of MV to Employee + at least MEC offered to Dependents + at least MEC conditionally offered to Spouse
1L	Individual coverage HRA (ICHRA) offered to Employee only with affordability determined by using Employee’s primary residence
1M	Individual coverage HRA (ICHRA) offered to Employee + Dependent (but not Spouse) with affordability determined by using Employee’s primary residence
1N	Individual coverage HRA (ICHRA) offered to Employee, Spouse & Dependent with affordability determined by using Employee’s primary residence
1O	Individual coverage HRA (ICHRA) offered to Employee only with affordability determined by using Employee’s primary site of employment
1P	Individual coverage HRA (ICHRA) offered to Employee + Dependent (but not Spouse) with affordability determined by using Employee’s primary site of employment
1Q	Individual coverage HRA (ICHRA) offered to Employee, Spouse & Dependent with affordability determined by using Employee’s primary site of employment
1R	Individual coverage HRA (ICHRA) offered that is not affordable
1S	Individual coverage HRA (ICHRA) offered to part-time Employee or Non-Employee
1T	Individual coverage HRA (ICHRA) offered to Employee + Spouse (but not Dependents) with affordability determined by using Employee’s primary residence
1U	Individual coverage HRA (ICHRA) offered to Employee + Spouse (but not Dependents) with affordability determined by using Employee’s primary site of employment
1V – 1Z	Reserved

Line 15 – Employee Contribution

If an employer offered minimum value coverage to the employee, and the employer is not using the qualifying offer method for reporting (i.e., code 1A on Line 14), Line 15 must be completed indicating the monthly employee contribution (dollars and cents). If the amount is the same for the entire 12 months, the amount may be entered once in the “all 12 months” column, or, alternatively, can be entered in the column for each of the 12 months separately.

Line 15 does not need to be completed if the employer uses code 1A, 1F, 1G, 1H, or 1S on Line 15. If the employer entered code 1A (indicating a qualifying offer) on Line 14, then nothing should be included on Line 15 since 1A indicates that the employer offered the employee a minimum value plan that cost less than 9.5% (indexed annually—9.02% in 2025) of FPL.

Line 15 should reflect the amount the employee must contribute to enroll in single minimum value coverage. The employee contribution is determined differently depending upon whether the employee is offered a traditional group medical plan or an individual coverage HRA (ICHRA). Note: If COBRA was offered, the employee contribution should reflect the cost of single COBRA coverage.

Employee Contribution for a Traditional Group Medical Plan

The employer should enter the amount of the employee’s share of the lowest-cost monthly premium for self-only minimum value coverage that was offered to the employee (single coverage). If an employee was offered more than one plan option, the employer should use the lowest-cost minimum value plan offered to the employee, not the plan the employee actually chose. When the employee contribution varies by employee (e.g., age-banded rates, different contributions by class, or determined by the employee’s salary), it is necessary to calculate the employee contribution that applies separately for each full-time employee and report accordingly.

To determine the monthly employee contribution, an employer may divide the total employee contribution for single coverage for the plan year by the number of months in the plan year. For example, if the plan year begins January 1, the employer may determine the amount to report for each month by taking the total annual employee contribution for single coverage for all 12 months and dividing by 12. For example, if the plan year begins April 1, the employer may determine the amount to report for January through March 2025 by taking the total annual employee contribution for the plan year ending March 31, 2025 and dividing by 12; and the amount to report for April through December 2025 may be determined by taking the total annual employee contribution for the plan year ending March 31, 2026 and dividing by 12.

It is also necessary to consider the following factors when calculating the employee contribution:

HSAs – Contributions to a health savings account (HSA) do not affect the employee contribution.
HRAs – Employer funding of a health reimbursement arrangement (HRA) offered alongside a traditional group health plan is typically not available to reimburse medical premiums (the HRA is more often designed to offset plan cost-sharing), in which case the HRA funding may count toward determining minimum value, but it does not impact (or reduce) the employee contribution for purposes of determining affordability.
Flex Credits – Flex credits (or defined contributions) restricted to health coverage (e.g., medical, dental, vision, or health FSA) will decrease the employee contribution, but flex credits that can be used for non-health coverage do not decrease the employee contribution. For example, if the employer makes $300/month available via flex credits, and the employee’s cost for single medical coverage is $500/month:
- If the flex credit may be used only toward the medical, dental or vision premiums or a health FSA, the monthly employee contribution for Line 15 is $200 ($500 – $300).
- However, if in addition to the options mentioned above, the employee may use the $300 toward life, disability, DCAP or taken as cash, the monthly employee contribution for Line 15 is $500.
Opt-Out Credits – If the employee has the option to either enroll in coverage or receive an opt-out or waiver incentive, this option may increase the employee contribution unless the arrangement meets the requirements of an “eligible opt-out arrangement” (i.e., opt-out credit is limited to employees who show proof of non-individual MEC for the employee and all of the employee’s tax family). For example, when the employee cost for health coverage is $125/month, but there is an opt-out credit of $50/month if coverage is waived:
- If the opt-out credit is available to all who waive, the employee contribution for affordability purposes is $175 ($125 + $50), although there is transition relief available for such unconditional opt-out arrangements that have been in place since before December 16, 2015 without substantial change.
- If it is an eligible opt-out arrangement, the employee contribution for affordability purposes is $125.
Wellness Incentives – Affordability is determined assuming the individual fails to satisfy any wellness requirements, UNLESS it is tobacco-related. For example, if the required employee contribution for the month is $200, and the potential wellness incentive reduces the cost to $150:
- If the incentive is not tobacco-related, $200 (not $150) should be reported on Line 15.
- If the incentive is tobacco-related, $150 (not $200) should be reported on Line 15.

Employee Contribution for an Individual Coverage HRA (ICHRA)

An ICHRA that is “affordable” will automatically be considered minimum value so long as the ICHRA is available to reimburse individual health coverage and Medicare premiums (not just qualifying medical expenses other than premiums).

The affordability of an ICHRA is tied to the lowest cost silver plan available on the public Marketplace, which will vary by the employee’s age and location. The employee contribution is the excess of the monthly premium for the lowest cost silver plan over the monthly ICHRA amount (i.e., lowest cost silver plan – monthly ICHRA amount). To make it easier to determine affordability, the IRS provided several safe harbors:

Age – Affordability can be based on the employee’s age on the first day of the plan year, or when the employee is first eligible for the ICHRA, to avoid having to adjust for age changes during the plan year. For a non-calendar year plan, affordability may be determined using a different age from what is listed at the beginning of Part II of Form 1095-C.
Location – The employer may choose to use the lowest cost plan available where the employee resides or the employee’s primary site of employment. An employee’s primary site of employment is the location at which the employer reasonably expects the employee to perform services, which may be the employee’s residence if the employee does not have a particular assigned office space or a worksite to which to report.
Look-Back Month – An employer with a calendar year plan may use the monthly premium for the lowest cost silver plan for January of the prior calendar year. An employer with a non-calendar year plan may use the monthly premium for the lowest cost silver plan for January of the current calendar year.
Non-Tobacco Rates – As with traditional group health plans, affordability is based on plan premiums applicable to non-tobacco users.

Line 16 – Additional (Safe Harbor) Information

Employers may use one of eight codes to report additional information about the status of employees on Line 16. This line does not always have to be completed; the employer enters a code only if one applies to the employee for that month. The purpose of this line is to provide the IRS with additional information that will help the agency more accurately assess liability for employer shared responsibility payments and individual tax liability. If a code does not apply for Line 16, it suggests a possible risk of penalty under §4980H rules.

The following chart lists the available codes for Line 16.

Code	Description
2A	Employee not employed any day that month
2B	Employee part-time or coverage not offered for the entire month due to termination of employment
2C	Employee enrolled in coverage – Spouse and Dependent enrollment is not relevant; it is used to report the Employee’s enrollment only (use this code before any codes other than 2E)
2D	Limited non-assessment period (e.g., first partial month of employment, waiting period or initial measurement period)
2E	Multiemployer/union plan interim rule relief (an Employer taking advantage of the multiemployer transition relief uses this code in place of all other codes)
2F	Employer using the Form W-2 affordability safe harbor
2G	Employer using the Federal Poverty Line (FPL) affordability safe harbor
2H	Employer using the Rate of Pay affordability safe harbor
2I	Reserved

Additional Line 16 Guidance

If an employee elected coverage for the month, the employer should use code 2C (enrolled in coverage) even if other codes may also apply.
If the employee was in a waiting period, or an initial measurement period, but was offered coverage at the end of such period, use code 2D. Code 2D is also used in the first partial month of employment, or upon rehire or return from a leave of absence.
If the employee was offered coverage and waived, enter the applicable affordability safe harbor code (i.e., 2F, 2G, or 2H), or leave it blank if none applies. There is no specific code to indicate a waiver of coverage. Line 16 is left blank when a full-time employee is offered coverage, but does not participate in the plan, and the employer cannot use any of the affordability safe harbors.
If the employer is using code 1A on Line 14, use of any applicable code on Line 16 is optional (not necessary).
ALEs that have union employees are required to report on any such employees that are full-time. For any month in which the employer enters code 2E on Line 16 (indicating that the employer was required to contribute to a multiemployer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief), the employer should use code 1H on Line 14. Code 1H may be used regardless of whether the employee was eligible to enroll in coverage under the multiemployer plan. To take advantage of the multiemployer interim rule relief, the employer must obtain assurance from the plan administrator that the plan offered provides minimum value and is affordable. NOTE: Even if the union employee is coded as not being offered coverage on Line 14 (i.e., code 1H), the employee may be treated as being offered coverage for purposes of determining whether coverage was offered to at least 95% of full-time employees if the multiemployer interim rule relief applies.

Understanding Affordability

Coverage is “affordable” for purposes of satisfying §4980H(b) requirements if the required employee contribution reported on Line 15 (for single coverage under the lowest cost minimum value plan offered) does not exceed a set percentage of the employee’s household income or one of the affordability safe harbors. The affordability percentage is based on the employer’s medical plan year. For plan years beginning in 2024, the applicable percentage is 8.39%; and for plan years beginning in 2025, the applicable percentage is 9.02%. For example, an employer with a July – June plan year would use 8.39% for January – June 2025 and 9.02% for July – December 2025.

Employers may use any of the affordability safe harbors for any reasonable category of employees, provided the same safe harbor is used on a uniform and consistent basis for all employees in a category. The regulations provide that reasonable categories for this purpose generally include specified job categories, nature of compensation (hourly or salary), geographic location, and similar bona fide business criteria. The following are the three affordability safe harbors for 2025 plan years:

· FPL – Employee contribution does not exceed 9.02% of FPL for a single individual.

· Rate of Pay – Employee contribution does not exceed 9.02% of hourly rate x 130 (or monthly salary).

· Form W-2 – Employee contribution does not exceed 9.02% of 2025 Box 1 wages

Line 17 – Zip Code Information for ICHRAs

An ALE who offers an ICHRA to an employee must complete Line 17 on the employee’s Form 1095-C. If the employee was not offered an ICHRA, Line 17 should be left blank. The zip code entered on Line 17 should reflect the zip code used by the employer to determine affordability for the ICHRA:

Enter the ZIP code of the employee’s residence if Code 1L, 1M, 1N or 1T is used for Line 14.
Enter the ZIP code of the employee’s primary site of employment if Code 1O, 1P, 1Q or 1U is used for Line 14.

1095-C Part III (Employers Offering Self-Funded Coverage)

ALEs who sponsor a self-funded health plan are also required to complete Part III of Form 1095-C for all employees (full-time and part-time) AND non-employees who were covered by the self-funded plan for any month during the year. This generally includes self-funded or level-funded group major medical plans, as well as HRAs. However, the employer can ignore the HRA for reporting purposes if the HRA has the same plan year and the same plan sponsor as the major medical plan. An HRA integrated with a spouse’s employer’s group medical plan, or a stand-alone HRA (e.g., a retiree HRA) may require reporting. In addition, an ICHRA is a self-funded group health plan subject to coverage reporting requirements. A qualified small employer (QSEHRA) is not subject to reporting.

Part III is not completed for individuals who were covered by a fully-insured plan. Insurance carriers will provide individuals covered by a fully-insured plan with a separate Form 1095-B coverage statement.

Part III is used by employers to report coverage-related information for all covered individuals, including employees, non-employees, spouses, and dependents. However, each covered individual does not receive their own Form 1095; rather, a Form 1095 is generally provided to the primary subscriber or responsible individual (e.g., the employee) and then the dependents are listed on the same form.

If Part III is completed for individuals who enrolled in self-funded coverage, place an X in the box at the top of Part III. Then, for each individual covered by the self-funded plan, the employer must provide the following data:

Name;
SSN (date of birth (DOB) may be used if SSN is not available); and
Indication of whether the individual had coverage in the employer’s self-funded plan for each calendar month.

Name/SSN Mismatches

Social security number (SSN) / tax identification number (TIN) errors occur when the employee fails to provide accurate information, the employer records information inaccurately, or the employee provided information that is different than what is on file with social security administration (SSA) or the IRS. This is the most common error that occurs in ACA employer reporting.

When the employer receives an accepted, but with errors response to submitted employer reporting, the employer will not be penalized for failing to provide accurate SSN/TIN information so long as there is reasonable cause.

To establish reasonable cause for not providing accurate SSN/TIN information, the employer is required to make 3 reasonable attempts using the following steps for an incorrect SSN/TIN (typically discovered when the reporting is submitted and then returned with an error):

1. Make an initial solicitation upon hire or at the individual’s first enrollment (i.e., application for coverage submitted);

2. If the first solicitation is unsuccessful, make a second solicitation by December 31 of the year in which the error is discovered;

3. If the second solicitation is unsuccessful, make a third solicitation by December 31 of the following year.

If at any point the employer discovers corrected information, IRS guidance indicates the corrected information should be used for next year’s reporting (a corrected form does not have to be submitted). If the employer follows the process and is unable to obtain better information, there is nothing further to do other than to internally document the process for audit purposes. Even if the employee confirms that the SSN/TIN is accurate, if it doesn’t match what the IRS has on file, the employer is required to notify the employee and ask the employee to re-confirm and potentially make changes with the IRS or SSA.

NOTE: When the SSN/TIN for the employee (versus a covered dependent) is not matching up to IRS data, there may be broader employment implications outside of just employer reporting. Therefore, the employer may want to take further steps to ensure accurate information is on file.

Other Part III Details

The employer should check the coverage box if an individual is covered for any day(s) during the month. This rule is different than the rule used for reporting on offer of coverage on Line 14 of Part II, where it is only considered an offer of coverage if the offer is available for the entire month.

When preparing a Form 1095-C solely to report self-funded coverage for individuals that were not full-time employees for any month of the year, use Code 1G in Part II for “all 12 months”, leave Lines 15 and 16 blank, and then complete Part III.

IRS Reconciliation

The IRS is actively enforcing §4980H offer of coverage requirements and §§6055 and 6056 reporting requirements.

Letter 5699

The IRS is reviewing the number of Form W-2s filed by employers each year. For employers who appear to be ALEs based on the number of Form W-2s filed, the IRS then checks to see if Form 1094-C and Form 1095-Cs were submitted. If not, the IRS sends a Letter 5699 asking the employer to confirm status as an ALE and also to confirm whether reporting was submitted.

The employer must then respond and indicate:

The employer was not an ALE for the year.
The employer was an ALE and submitted the reporting (this may require re-submitting the reporting).
The employer was an ALE and will submit the forms (either with the response or as soon as they can be prepared).

Employers have 30 days to respond. It is possible to call or fax the IRS and request an extension if needed.

If the forms are not submitted, or are submitted late, the employer may then receive a letter indicating that penalties of up to $340/form are due (the penalty is doubled if the employer also failed to provide copies of Form 1095s to full-time employees and covered individuals).

No More Good Faith Relief

Through 2020 reporting, the IRS provided relief from the reporting penalties for failing to provide complete, correct information if it was clear the employer made a good faith effort to report and submitted the reporting on a timely basis. Beginning with the 2021 reporting, this good faith relief is no longer available, and the IRS could impose penalties of up to $340/form for missing or inaccurate information on the Form 1094 or 1095s. Employers should be extra careful in reviewing and approving submissions to the IRS, whether the employer self-reports or obtains help from a vendor, to make sure the reporting is complete and matches employees’ status and offer of coverage information for each month of the year.

Letter 226J

ALEs must self-report via Form 1094-C and Form 1095-Cs whether coverage was offered in accordance with §4980H requirements (the “employer mandate”). The IRS will consider the employer’s reporting alongside the list of employees who received subsidized coverage from a public Marketplace.

If an ALE indicates on its Form 1094-C that MEC was NOT offered to substantially all full-time employees for each month of the calendar year (in Part III, Column (a)), and the IRS finds at least one full-time employee received subsidized coverage from a public Marketplace, the IRS will assess a penalty under §4980H(a). The penalty for 2025 is $241.66/month x the full-time employee count (minus the first 30 full-time employees).

If an ALE indicates via coding on an employee’s Form 1095-C (Lines 14-17) that a full-time employee was not offered affordable minimum value coverage, and the IRS finds that same employee received subsidized coverage from a public Marketplace, the IRS will assess a penalty under §4980H(b) if the employer is not already subject to a penalty under §4980H(a) for the month. The penalty for 2025 is $417.50 for each such full-time employee.

If the IRS finds that a penalty is owed, the IRS will send the employer a Letter 226J proposing an assessment and offering an opportunity to appeal. You can find the IRS information page describing Letter 226J – https://www.irs.gov/individuals/understanding-your-letter-226-j.

Employers have 30 days to either pay the proposed assessment or appeal. It is possible to call or fax the IRS and request an extension if needed. Oftentimes there are misunderstandings as to offer of coverage requirements and mistakes in handling the reporting requirements. We strongly recommend that employers work with their benefit advisors in responding to IRS Letter 226J.

Appendix A – State Individual Mandate Reporting

The federal individual mandate tax was reduced to $0, and therefore individuals without minimum essential coverage will not face a federal penalty, but several states have implemented their own individual mandates with associated penalties. To enforce state individual mandates, the states require employer coverage reporting similar to what is required at the federal level. High level details are captured in the table below.

State/District

Form(s) Required

Filing Deadline

Penalties

More Information

California

Employers that provide fully-insured or self-funded coverage to CA residents

Form 1094 and 1095s must be provided to the Franchise Tax Board (FTB), generally through the state’s File Exchange (FX) System

Form 1095s to covered individuals January 31

FTB filing due March 31 (automatic extension to May 31)

$50 per applicable individual

https://www.ftb.ca.gov/file/business/report-mec-info/index.asp

Massachusetts

Massachusetts employer or a non-Massachusetts employer who conducts business or maintains an office in Massachusetts

Form 1099-HC must be provided to employees, and a report that includes details about the 1099-HC must be provided to the Department of Revenue (DOR)

Form 1099-HC to employees January 31

Report to DOR March 31

$50 per individual, up to $50,000

https://www.mass.gov/service-details/health-care-reform-for-employers

New Jersey

Employers that provide fully-insured or self-funded coverage to NJ residents

Form 1094 and 1095s must be provided to the Department of Revenue and Enterprise Services (DORES) via the secure filing system

Form 1095s to covered individuals March 2

DORES filing due March 31

No penalty specified

https://nj.gov/treasury/njhealthinsurancemandate/employers.shtml

Rhode Island

Employers that provide minimum essential coverage to RI residents

Form 1094 and 1095s must be provided to the Division of Taxation (DOT)

Form 1095s to covered individuals March 2

DOT filing due March 31

No penalty specified

https://tax.ri.gov/guidance/health-insurance-mandate

Washington D.C.

Employers that provide self-funded coverage to District residents

Employers that provide fully-insured coverage to at least 50 FT employees and that provide coverage to District residents

Form 1094 and 1095s must be provided to the Office of Tax and Revenue (OTR) electronically through MyTax.DC.gov

Form 1095s to covered individuals March 2

OTR filing 30 days after the IRS deadline for filing Form 1094 and Form 1095s

No penalty specified

https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/FAQ%20reporting%20SRP%20Update.3.31.20.pdf

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Tags: Human Resources (HR), compliance alert, Compliance Notices, Labor

ACA Employer Reporting Guide

February 9, 2026

Section 1

How to Use This Guide

ACA Employer Reporting Basics

Who Must Report?

Applicable Large Employers (ALEs)

Employers Offering Self-Funded Group Health Plan Coverage

Timing of Reporting

Electronic Filing Requirements

Form 1095 Distribution (New for 2024 Reporting)

Format for Reporting

Consequences for Failure to Report

State Coverage Reporting

Understanding Form 1094

Overview

Form 1094-C Parts

Part I

Part II

Box A – Qualifying Offer Method

Box D – 98% Offer Method

Part III

Part IV

Other 1094-C Reporting Issues

Understanding Form 1095

Overview

TIP: Determining Full-Time Employee Status

Form 1095-C Parts

1095-C Part I

1095-C Part II (Lines 14 – 17)

Employee Age & Plan Start Month

Line 14 – Offer of Coverage

Offer of Coverage Tips

Line 15 – Employee Contribution

Employee Contribution for a Traditional Group Medical Plan

Employee Contribution for an Individual Coverage HRA (ICHRA)

Line 16 – Additional (Safe Harbor) Information

Additional Line 16 Guidance

Understanding Affordability

Line 17 – Zip Code Information for ICHRAs

1095-C Part III (Employers Offering Self-Funded Coverage)

Name/SSN Mismatches

Other Part III Details

IRS Reconciliation

Letter 5699

No More Good Faith Relief

Letter 226J

Appendix A – State Individual Mandate Reporting