Navigating the complexities of Affordable Care Act (ACA) compliance can be a daunting task for businesses. Among the essential requirements are IRS Forms 1094 and 1095—two documents that play a critical role in reporting health coverage information. While they may seem like routine paperwork, their accurate and timely submission is essential to avoid costly penalties and maintain compliance. These forms serve distinct yet complementary purposes, capturing both employer-level and employee-specific health coverage details. For organizations in industries like healthcare, higher education, manufacturing, and finance, managing these reporting obligations efficiently is crucial. Leveraging the right ACA compliance management solution can simplify the process, ensuring both accuracy and compliance without the administrative burden.
A 1094 form is essentially a transmittal form that accompanies the 1095 forms when they are submitted to the IRS. It serves as a summary report, providing an overview of the employer’s compliance with ACA requirements. Specifically, the 1094-C form, used by applicable large employers (ALEs), includes details such as the employer’s identification information, the total number of 1095-C forms being submitted, and whether the employer offered minimum essential coverage to a sufficient percentage of its full-time employees. This form also identifies whether the employer is part of an aggregated group and must include information about the organization’s compliance on a month-to-month basis. Without a correctly completed 1094 form, the IRS will not accept 1095 filings, making it a crucial component of ACA reporting.
While the 1094 form is a summary, the 1095 form is much more detailed and is issued to employees and the IRS to provide information about the health coverage offered. The 1095-C, for instance, is used by ALEs to report whether they provided qualifying health insurance to employees and their dependents. It includes specifics such as the months during which an employee was eligible for coverage, the lowest-cost premium available, and whether the employer met ACA requirements for affordability.
The 1095 form is crucial for both employees and the IRS. Employees use this form to determine whether they qualify for premium tax credits when filing their personal tax returns. The IRS uses it to ensure employers are adhering to ACA requirements and providing adequate coverage. Given the importance of this form in regulatory compliance, organizations must ensure accurate reporting and timely distribution to employees.
Employers that meet the criteria of an applicable large employer (ALE) under the ACA are required to file both 1094 and 1095 forms. An ALE is any organization that has 50 or more full-time employees, including full-time equivalents. These employers must report information about the health insurance coverage they offer to their employees, ensuring compliance with the ACA’s employer mandate.
In addition to ALEs, insurers and self-funded employers are required to file 1095-B forms to report minimum essential coverage. While smaller employers that do not meet the ALE threshold are generally exempt from filing these forms, any business that provides health coverage to employees should consult with compliance professionals to ensure they are meeting all regulatory obligations.
Failure to file 1094 and 1095 forms can result in significant penalties from the IRS. Employers who do not submit these forms on time or file incorrect information may face fines. The minimum penalty amount depends on how late the forms are submitted and can range from $60 to $330 per form. If an employer intentionally disregards the filing requirement, these penalties can increase substantially, starting at $660 per form. Interest rates can also come into play, with rates varying depending on the penalty type and amount.
In addition to financial penalties, failing to file these forms can create compliance risks that impact an organization’s reputation and ability to conduct business smoothly. Employees rely on 1095 forms to file their taxes accurately, and errors or missing forms can lead to confusion, complaints, and even legal challenges. Compliance with ACA reporting requirements is not just about avoiding penalties—it’s about ensuring smooth operations and maintaining trust with employees and regulatory bodies alike.
Managing ACA compliance doesn’t have to be overwhelming. With TruPay’s ACA Compliance Management Solution, generating and filing 1094 and 1095 forms becomes a streamlined process. Our system automates data collection and ensures that each form is accurate and submitted on time, helping businesses avoid costly penalties and compliance risks. Whether it’s tracking employee eligibility, maintaining coverage records, or preparing IRS submissions, our solution simplifies every step of the process.
Industries like healthcare, higher education, manufacturing, and finance rely on TruPay to reduce administrative burdens and maintain compliance with confidence. With our powerful human capital management (HCM) platform, InspireHCM, our intuitive ACA Management module integrates seamlessly with other TruPay software solutions, such as payroll software and benefits management software, making it easy to meet reporting requirements without added complexity.
Ready to take the stress out of ACA compliance? Request a live demo today!