Preparing ACA Forms 1094 and 1095
Trey Tompkins No Comments

Filing 2023 1094 and 1095 Forms With the IRS by Mail? Think Again

Before this year, small employers could file their ACA Employer Reporting forms with the IRS on paper in the mail.  Filing via U.S. mail was available so long as the employer was filing fewer than 250 returns. 

Electronic Filing Now Required for Almost All Employers

Beginning with filings for 2023 (filed in 2024), the IRS has virtually eliminated that option.  Federal Regulations now require employers filing 10 or more returns in aggregate to file their Forms 1094-C and 1095-C electronically.  For the purposes of this new rule, “in aggregate” refers to the ACA related forms and Forms W-2 and 1099.  This aggregation will effectively limit future by-mail filings to employers with 1-5 employees, at most.

This change applies to both the C-Forms filed by Applicable Large Employers (ALEs) and the B-Forms filed by non-ALEs sponsoring a self-insured plan.  Because of this change, employers that previously filed 1094 and 1095 Forms via the mail will need to make arrangements to file electronically through the IRS’s Affordable Care Act Information Returns (AIR) system or work with an ACA reporting vendor with access to that system.

Waivers For Financial Hardship

The IRS can issue waivers for the electronic filing requirement for financial hardship.  However, there are important steps employers must take before the 1094 and 1095 Form filing deadlines in order to apply.  Employers seeking a waiver must submit IRS Form 8508 at least 45 days before the April 1, 2024 due date of 2023 ACA filings.  That deadline would be February 14, 2024.  Waiver applications based on financial hardship must be supported by two documented cost estimates from third party providers.  The IRS will reject waiver requests without the required third party estimates.

Penalties For Failure To Electronically File

Employers that fail to timely electronically file their 1094 and 1095 Forms (or receive a waiver) are subject to penalties for incorrect reporting.  For 2024, the failure to correctly file penalty is $310 per form. 

Admin America Can Help!

Admin America is available to assist employers with electronic filing of their 2023 (and prior year) 1094 and 1095 Forms.  If appropriate, Admin America can also assist with extensions of time to file to extend the April 1 deadline for an additional 30 days. Interested employers can obtain more information about Admin America’s ACA filing services online or by contacting us at mailto:aca@adminamerica.com. 

How the ACA's affordability percentage impacts potential tax penalties.
Trey Tompkins No Comments

The 2024 ACA ESRP Affordability Percentage

This week the IRS revealed an annual adjustment to the the Affordable Care Act’s (ACA) affordability percentage. This percentage helps determine whether employers may owe significant fines under the ACA’s Employer Shared Responsibility Provision (ESRP). The newly announced limit for group health plan years beginning in 2024 is 8.39%. This is significantly lower than 2023’s affordability percentage of 9.12%. The IRS announced this most recent annual change in Revenue Procedure 2023-29.

Employers and their benefits advisors should analyze how this lower affordability percentage impacts their ESRP Penalty risk next year. Incorporating the new limits into employee benefits planning for 2024 could spare employers from very large penalties down the road.

The Importance of the Affordability Percentage to Employers

The ACA’s ESRP applies to Applicable Large Employers (ALEs). ALEs are employers (or related employers) who employed 50 or more full time employees (or equivalents) during the prior year. ALEs who do not provide health coverage that is “affordable” to employees and their dependents risk significant tax penalties. For 2024, the penalty for failing to provide affordable coverage to each full time employee who receives a premium tax credit for health insurance coverage is $4,460 per year.

The ACA defines affordability as a percentage of each employee’s household income. Because employers typically cannot know an employee’s household’s other sources of income, the IRS allows employers to establish the affordability of their coverage in reference to three different benchmarks: the current Federal Poverty Level, the employee’s Rate of Pay, and the employee’s W2 income for the applicable year.

The percentage announced by the IRS this week is the maximum amount employers can charge for employee only group health insurance coverage as compared to any one of those three benchmarks.

How This Newly Announced Change Affects ALEs

Employers and their benefits advisors planning 2024 group health plan offerings need to understand the impact of the new percentage. Employee premiums that were affordable in 2023 may not be in 2024. Employers could avoid this penalty risk with proper preparation.

For example, assume an employee who earns an hourly wage of $20.00 per hour. Also assume that this employer chooses the Rate of Pay standard to establish that their coverage is affordable. In 2023, if the employer offered that employee coverage for $237 per month, it would have been considered affordable. In 2024, that same employee’s coverage would have been unaffordable even if the premium was reduced to $219 per month. This example becomes even more pertinent for employers with lower paid employees.

Analyzing and adjusting their 2024 employee premiums now could save employers enormous ESRP penalties in the years to come.

For More Help Understanding how the ESRP Applies to Your Situation

Employers can contact Admin America for more information about the ESRP. Contact our ACA team via telephone at (678) 578-4631 or via email at aca@adminamerica.com. Alternatively, additional online resources are available here.