Employer Penalties for Noncompliance with ACA Information Reporting
The Affordable Care Act (ACA) requires Applicable Large Employers (ALEs) to report to the IRS whether they offered their full-time employees (and if self-insured, their full-time employees’ dependents) affordable and minimum value coverage in order to satisfy the Employer Mandate.
ALEs are subject to penalties for failure to timely provide employees with Form 1094-C/1095-C and failure to report Form 1094-C/1095-C to the IRS. Since 2015, the penalties have significantly increased for information reporting failures due to the Trade Preferences Extensions Act of 2015. The filings required for 2015 were due in early 2016 and the filings for 2016 were due in early 2017. In order to timely file for 2017, ALEs should be aware of the following due dates:
- January 31, 2018 -Forms 1095-C must be issued to employees on or before this date.
- April 2, 2018 – Forms 1094-C/1095-C must be electronically filed with the IRS on or before this date.
The penalties can be severe for non-filing of information returns, failure to file the information returns on time, or filing missing or incorrect information on the returns.
- Under IRC section 6721, the penalty for failure to file a correct information return is $260 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,218,500.
- Under IRC 6722, the penalty for failure to provide a correct payee statement is $260 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,218,500.
- The penalties may be doubled for an ALE if they fail to file the information returns with the IRS and fail to furnish employees with their statements.
- If an ALE fails to furnish or provide employees with the information returns with “intentional disregard”, each $260 penalty can increase to $530 per failure and there is no cap on the penalty amount.
Correcting a reporting failure, within 30 days of the due date or after 30 days from the due date but before August 1st, will also reduce the penalty amount.
Employers can request a proposal for ACA Elevate at this link.
Agents and brokers can request a proposal for their clients at this link.