What You Should Know About ACA Reporting Penalties

We recently spoke about the penalties and fees you could face from the IRS if you fail to comply with the new reporting requirements as outlined by the Affordable Care Act (ACA). Today, we’re going to dive a little deeper into how an employer can become liable for paying these compliance or reporting fees.

What puts you at risk for a penalty?
The main penalty to watch out for as an employer is the Employer Shared Responsibility Payment (ESRP). You become liable for this payment if you either

• (a) don’t offer health coverage to at least 95% of your full-time employees (and their dependents), and at least one of them receives a premium tax credit from the Marketplace, or
• (b) you do offer health coverage to at least 95% of your full-time employees but at least one is still able to receive a premium tax credit to help pay for coverage from the Marketplace (meaning your coverage didn’t meet Minimum Essential Coverage and Minimum Value regulations).

So, keeping in mind what we learned in our last post, you can avoid these penalty risks by providing the right amount of coverage to the right amount of employees as defined by the ACA, and by reporting this coverage to the IRS each year on Form 1094 and Form 1095.

The IRS is offering transition relief for employers who need it for the 2015 tax year, which you can read more about on the IRS’s website here.

How do you know if the coverage you offer is affordable and provides minimum value?
Coverage is considered affordable if the employee’s share of the premium is less than 9.5% of the employee’s annual household income. Since employers generally don’t know their employees’ entire household incomes, you can determine if the employee’s share is affordable based on:

1. the wages on their W-2,
2. their rate of pay, or
3. the federal poverty line.

You’ll know if a plan provides minimum value if it covers at least 60% of the total cost of benefits expected to be incurred under the plan.

A good way to avoid any filing penalties is to make sure to e-file ACA Forms with ExpressIRSForms; we’ll make sure everything you fill out is correct and in place before you file your return with the IRS. To get started, just create a free account!

Have questions? That’s what we’re here for - from 9:00 a.m. to 6:00 p.m. EDT, Monday through Friday, at (704) 684-4751, or 24/7 at support@ExpressIRSForms.com.



Looking for something a little less hands on? Check out ExpressACAForms, our full-service e-filing software for Forms 1094 and 1095.