As 2023 comes to a close, the ACA Compliance Team at Tronconi Segarra & Associates is once again ready to assist with the reporting associated with the ACA employer mandate. If your business employed 50 or more full-time employees during 2023 (including full-time equivalents), you may be subject to the ACA 1094 and 1095 reporting requirements, whether fully-insured or self-insured.
Employers subject to the mandate must furnish Form 1095 to their full-time employees no later than March 4, 2024. These employers are also required to file the applicable forms with the IRS no later than February 28, 2024 if prepared & filed manually or by April 1, 2024 for electronic filers.
Certain states continue to impose similar reporting mandates requiring reporting on the coverage offered to employees that reside in California, New Jersey, Rhode Island and Washington DC. Massachusetts and Vermont’s individual mandates require residents to self-report coverage on their individual tax returns.
There are two important ACA changes to note:
- In 2023 under the Taxpayer First Act, the IRS lowered the electronic filing threshold down to 10 forms, including employment tax returns and information returns, such as W-2s and 1099s. Organizations filing 10 or more IRS returns of any kind in aggregate are now required to file almost all returns electronically, including the 2023 ACA Forms 1094 and 1095.
- The other change pertains to the 2024 ACA affordability percentage, which is used to determine the threshold at or below which the cost of coverage will be considered affordable. Generally, coverage offered to a full-time employee is considered affordable if the employee’s contribution for self-only coverage doesn’t exceed 9.12% for 2023 of the employee’s household income for the taxable year. Because employers have no actual knowledge of their employees’ household incomes, the rules provide for three affordability safe-harbors:
- Employee’s Form W-2 wages
- Employee’s rate of pay
- The federal poverty guidelines for a single individual
For 2024, the affordability percentage decreased to 8.39% for all three safe-harbors. An employer may use one or more of these safe-harbors for all employees or any reasonable category of employees, as long as it is applied uniformly and consistently. What this means for employers in 2024 is that they may need to shoulder more of the cost of self-only coverage offered to full-time employees to avoid the employer mandate penalty.