If you’re an Applicable Large Employer (ALE) — meaning you have 50 or more full-time-equivalent employees — you’re required to file annual ACA reporting with the IRS through Forms 1094-C and 1095-C. The reporting is the operational compliance pathway for the ACA’s employer mandate. It documents what coverage you offered, to whom, and when.

ACA reporting isn’t optional for ALEs, and the penalties for late, missing, or inaccurate forms are real. Here’s the practical checklist: who files what, when, how to manage the workflow, and how to avoid the common pitfalls.

Who needs to file ACA reporting

The ACA reporting requirements are tied to ALE status:

ALEs (50+ FTE employees in the prior calendar year): Required to file Forms 1094-C and 1095-C annually.

Small employers (under 50 FTEs): NOT required to file Forms 1094-C and 1095-C.

Self-funded small employers: May have separate reporting requirements under Forms 1094-B and 1095-B (which document minimum essential coverage), regardless of ALE status. This is a different reporting track and applies to self-funded plans specifically.

Aggregated ALE groups: When multiple related companies meet the FTE threshold collectively, each member of the controlled group has individual filing obligations, with specific rules for how the group is reported.

If you’re not sure whether you’re an ALE, Does the ACA Employer Mandate Apply to Businesses with Under 50 Employees? walks through the FTE calculation.

What Forms 1094-C and 1095-C actually cover

Form 1094-C: Transmittal

Form 1094-C is the cover sheet for an ALE’s annual reporting. It includes:

  • Employer identification (name, EIN, address)
  • Whether the employer is part of an aggregated ALE group
  • Full-time employee count by month
  • Summary of offer of coverage
  • Indicators of plan offerings and qualifying offers

Each ALE files one 1094-C per year as the transmittal accompanying their 1095-C forms.

Form 1095-C: Per-Employee Statement

Form 1095-C is filed for each full-time employee (and sometimes part-time employees of self-funded plans). It includes:

  • Employee identification (name, SSN, address)
  • Employer identification (name, EIN)
  • Monthly information about the offer of coverage:
    • Whether the employee was offered coverage each month
    • The lowest-cost monthly premium for the employee’s required share of self-only coverage
    • Whether coverage met affordability and minimum-value standards
    • Codes describing the coverage offered

Each ALE files multiple 1095-Cs — one per full-time employee. Employees use 1095-C information when filing their personal taxes. It’s how the IRS verifies whether they received affordable employer coverage and whether they’re eligible for premium tax credits.

Filing requirements

ALEs must:

  1. File Forms 1094-C and 1095-C with the IRS. Filing must be electronic for ALEs filing 250 or more 1095-C forms; paper filing is allowed below that threshold but increasingly rare.
  2. Furnish Form 1095-C to each full-time employee. Required by an IRS-set deadline (typically early March).
  3. Maintain documentation supporting the reporting (offer of coverage records, affordability calculations, employee status determinations).

The IRS sets specific deadlines annually. Generally:1

  • Furnish 1095-C to employees: by an IRS-set date in early March
  • File 1094-C/1095-C with IRS (electronic): by an IRS-set date (typically March 31 for electronic filers)
  • File 1094-C/1095-C with IRS (paper): earlier than electronic filers

Refer to current-year IRS instructions for specific dates each year.

The annual workflow

For an ALE managing ACA reporting, the typical annual cycle:

January (or earlier): preparation

  • Confirm ALE status for the prior year
  • Pull data needed for reporting (employment records, benefits enrollment, affordability calculations)
  • Coordinate with benefits broker or compliance vendor on reporting workflow

February: drafting

  • Generate draft 1095-Cs for each full-time employee
  • Generate draft 1094-C summarizing offer of coverage
  • Review for accuracy

Early March: distribution to employees

  • Distribute 1095-C to each full-time employee (and sometimes part-time employees in self-funded plans)
  • Provide instructions on how the form is used (employees may have questions)

Late March: IRS filing

  • File 1094-C and accompanying 1095-Cs with the IRS electronically (or paper if eligible)
  • Maintain documentation

Year-round: data collection

  • Track full-time employee status monthly
  • Track affordability of coverage for full-time employees
  • Document any plan changes affecting reporting

The data collection happens year-round. The formal reporting happens in early March.

What’s required in each 1095-C

Each Form 1095-C is detailed. Required information includes:

Part I — Employee and employer:

  • Employee name, SSN, address
  • Employer name, EIN, address

Part II — Employee Offer and Coverage:

  • Month-by-month indicator codes:
    • Was the employee offered coverage?
    • Was minimum essential coverage available?
    • Did the employee enroll?
    • Was coverage offered to dependents?
    • Did the offer meet affordability standards?
    • Did the offer meet minimum-value standards?
  • Lowest-cost employee contribution amount for self-only coverage
  • Affordability safe harbor codes used (W-2 wages, federal poverty line, rate of pay)

Part III — Covered Individuals (for self-funded plans):

  • Covered employee name and SSN
  • Covered dependent names and SSNs
  • Months of coverage

The coding system uses specific IRS codes that must be applied correctly. A code error can produce IRS questioning even if the underlying coverage was correct.

The codes that trip people up

Some specific code situations that frequently produce errors:

Code 1A vs. 1H: “Qualifying offer” (1A) requires specific affordability and dependent coverage standards. Many employers code 1A when 1H or another code is more appropriate.

Affordability safe harbor codes: The W-2 safe harbor (2H), Federal Poverty Line safe harbor (2G), and Rate of Pay safe harbor (2F) have specific calculation methodologies. Misapplied safe harbors create affordability documentation gaps.

Months when an employee was not full-time: Specific codes describe months when the employee was part-time, in a measurement period, or not employed. These often trip up employers with variable-hour workforces.

Mid-year hires/terminations: Coding for partial-year employment requires careful attention to which months coverage was offered or required to be offered.

Experienced benefits brokers or compliance vendors handle these correctly. DIY ACA reporting, on the other hand, frequently produces coding errors.

Penalties for failure

The IRS imposes penalties for:

  • Failure to file 1094-C with the IRS by the deadline
  • Failure to furnish 1095-C to employees by the deadline
  • Inaccurate information on filed forms
  • Failure to file electronically when required (250+ forms)

Penalty amounts are set annually by the IRS and indexed for inflation. They apply per form, with caps for unintentional vs. willful errors. Total annual penalties for an ALE with many employees and significant errors can be substantial.1

The IRS does enforce these penalties. ALEs that file late, miss employees, or use wrong codes routinely receive penalty notices.

How to manage compliance without drowning

ACA reporting is doable for an ALE, but it requires either internal infrastructure or a vendor partnership. Most employers choose a vendor for good reason.

Option 1: Benefits broker handles reporting

Many benefits brokers offer ACA reporting as part of their service or as an add-on. The broker pulls the necessary data out of your benefits and payroll systems, generates forms, and handles distribution and IRS filing.

Pros: Single vendor for benefits and reporting; reduces coordination overhead Cons: Broker may charge separately for reporting service

Option 2: Payroll vendor handles reporting

ADP, Paychex, Gusto (with appropriate service tier), and other major payroll providers offer ACA reporting integrated with their payroll service.

Pros: Reporting data flows directly from payroll Cons: Coordination required between payroll vendor (for employment data) and benefits vendor (for plan details)

Option 3: Specialized ACA compliance vendor

Vendors specializing in ACA reporting (e.g., First Capitol Consulting, Boon Group, others) handle the work as their primary service.

Pros: Deep expertise; built for the specific workflow Cons: Additional vendor relationship

Option 4: In-house with appropriate software

An HR or benefits team using ACA-capable software (some HRIS platforms include ACA reporting modules) can manage in-house.

Pros: Maximum control Cons: Real expertise and time commitment required; more risk of errors

For most ALEs, Options 1 or 2 (broker or payroll vendor) are the practical choice. The vendor cost is modest relative to the in-house time investment and the penalty risk of errors.

Common pitfalls

Crossing the ALE threshold without infrastructure. Businesses crossing 50 FTEs sometimes don’t realize until year-end that they’re now ALEs and must file. Plan ahead.

Not tracking part-time hours for FTE calculation. Some ALEs accidentally drop below the threshold by miscounting part-time employees, then are surprised when audits show they were ALEs after all.

Affordability calculations using the wrong safe harbor. The W-2, FPL, and Rate of Pay safe harbors have different requirements. Misapplication creates documentation gaps.

Mid-year coverage changes not reflected accurately. Employees who added or dropped coverage mid-year, or whose status changed, need accurate month-by-month coding.

Late distribution to employees. Even when IRS filing is on time, late employee distribution generates separate penalties.

Incomplete employee records (SSN, address). The IRS may reject filings with incomplete employee identification.

ACA reporting is a specific, annual obligation that’s manageable with the right partners. Most ALEs work with a benefits broker or payroll vendor to handle the reporting; the additional cost is typically meaningfully less than the time and risk of doing it poorly in-house.

What to do next

ACA reporting requirements apply to Applicable Large Employers (50+ FTEs). ALEs must annually file Form 1094-C and a Form 1095-C for each full-time employee, distribute 1095-Cs to employees, and maintain supporting documentation. Deadlines are set by the IRS and shift slightly year-to-year.

The reporting workflow is well-established but requires expertise. Most ALEs partner with a benefits broker, payroll vendor, or specialized compliance vendor to handle the work. The cost is modest relative to the penalty risk of errors. For ALEs without an established reporting partner, building one is a significant annual reduction in compliance risk.

For employers approaching the 50-FTE threshold, planning for ACA reporting infrastructure should start before crossing the line. The annual reporting obligation begins immediately upon reaching ALE status, and the data requirements span the full calendar year.

Need help establishing or improving your ACA reporting infrastructure? We can connect you with reporting vendors, integrate ACA reporting with your benefits administration, and ensure your data flow supports accurate annual filings. Talk to us.

Footnotes

  1. IRS, Affordable Care Act Information Returns (AIR) and Section 4980H Employer Shared Responsibility Provisions. Refer to current-year IRS guidance for specific filing deadlines, form instructions, and penalty amounts. ↩ ↩2