Employers with more than 50 full-time or equivalent employees must comply with the Affordable Care Act (ACA) requirements. These Applicable Large Employers (ALE) are required to file the ACA Form 1095 annually. As this year’s filings are being prepared, employers should consider five important things when setting up for 2023.
The New eFile Threshold Will Apply To Virtually All Employers
The IRS has lowered the eFile requirement threshold to any employer filing more than ten informational reports. With the compliance requirement for ACA reporting being businesses with 50 or more employees, virtually all employers must eFile reports going forward.
Affordability Threshold Has Changed
The Employer Shared Responsibility Payment requirement of the ACA sets the maximum amount employers can charge their employees for healthcare coverage to be considered “affordable.” This threshold has been lowered for 2023 to 9.16% from 9.61%. This means employers cannot charge as much for healthcare coverage in 2023 unless wages are increased.
This threshold has been lowered again for 2024 to 8.39%.
The details of how this affects your business should be discussed with your provider or an ACA specialist if you are self-funded.
Review Safe Harbor Codes
Employers must estimate the household incomes of their employees in order to establish whether the amount they charge for healthcare coverage is affordable. Since employers rarely know their employee’s household income, the IRS has established Safe Harbor codes to provide options for an employer to calculate the affordable standard.
The selection of the appropriate safe harbor code for each employee is critical in order to ensure compliance. Employers should consult with their provider or an ACA specialist to ensure the correct code is applied.
The ESRP Penalties Have Increased Again For 2023
ESRP (Employer-shared Responsibility Provisions) penalties fall into two categories: “A” and “B.”
“A” penalties are assessed to ALEs who do not offer group health coverage to at least 95 percent of their full-time employees and are set at $2,880 ($240/month)/employee.
“B” penalties are assessed to ALEs that make an offer of coverage that is either unaffordable or does not meet the ACA’s minimum value standard and is set at $4,320 ($360/month)
The Penalties Have Been Increased For 2024 To:
“A” penalties are assessed to ALEs that do not offer group health coverage to at least 95 percent of their full-time employees and are set at $2,970 annually or ($247.50/month)/employee.
“B” penalties are assessed to ALEs that make an offer of coverage that is either unaffordable or does not meet the ACA’s minimum value standard and is set at $4,460 ($371.67/month)
2023 Filing Deadlines
ALEs must annually issue individual statements (generally copies of Form 1095-C) and file Forms 1094-C and 1095-C with the IRS to disclose certain information about the group health coverage they offer their full-time employees.
- Employers must furnish individual statements to full-time employees by no later than March 4, 2024.
- ALEs must file applicable reports with the IRS no later than Feb. 28, 2024, if filing by paper, or by no later than April 1, 2024, if filing electronically (which is mandatory for ALEs filing more than ten forms).
Choose The Correct Form
The IRS provides two different form sets to report ACA information, Form 1094-B and Form 1094-C (transmittal forms), and Form 1095-B and Form 1095-C (information forms) for employers to report offers of coverage for 2023.
The Forms 1094-B and 1095-B are used by Self-funded plan sponsors that are not ALEs. ALEs use forms 1094-C and 1095-C
