What Is ACA Reporting for Employers and Who Must File?

ACA reporting for employers is the annual process of telling the IRS, and your workforce, what health coverage you offered or provided during the prior calendar year. If your business averaged 50 or more full-time employees (including full-time equivalents), you file Forms 1094-C and 1095-C. Smaller employers that self-insure, along with health insurance issuers, file Forms 1094-B and 1095-B instead. The information feeds the IRS’s enforcement of the employer shared responsibility rules under Internal Revenue Code Section 4980H, and mistakes carry two separate penalty tracks.

Who Has to File

Two groups have ACA reporting obligations: Applicable Large Employers, and self-insured employers of any size.

Applicable Large Employers

An Applicable Large Employer (ALE) is one that averaged at least 50 full-time employees, including full-time equivalents, on business days during the prior calendar year.¹ A full-time employee averages at least 30 hours of service per week, or 130 hours per calendar month.²

Full-time equivalents are counted separately. For each month, add up the hours worked by your non-full-time staff (capping each individual at 120 hours), then divide by 120.¹ If part-time employees collectively logged 600 hours in a month, that’s five FTEs. Add those to your actual full-time headcount and average across all months of the prior year to decide ALE status.

Self-Insured Employers and Insurers

A self-insured employer pays medical claims directly rather than buying insurance, and it must report regardless of size. A 15-person company that self-insures still has ACA reporting obligations.³ Health insurance issuers file their own returns for the individual and insured group coverage they provide.

Which Forms Apply to Your Business

The forms split on two questions: are you an ALE, and is the plan self-insured or fully insured?

ALEs with fully insured plans file Form 1095-C for each full-time employee, showing the coverage offer, the employee’s share of the lowest-cost self-only monthly premium, and the months of coverage. Form 1094-C is the transmittal.⁴
ALEs with self-insured plans use the same 1094-C and 1095-C, and also complete Part III of Form 1095-C to report who actually enrolled.⁵
Small self-insured employers that are not ALEs file Form 1095-B for each covered individual, with Form 1094-B as the transmittal.⁵
Health insurance issuers file Form 1095-B for insured coverage, including employer-sponsored insured plans and individual market coverage.⁵

Self-insured ALEs sometimes assume they should file 1095-B forms for their coverage. They generally should not; the enrollment information belongs on Part III of Form 1095-C. One exception applies. An ALE covering nonemployees, such as a former employee’s spouse enrolled in a self-insured plan, may use Form 1095-B for those individuals instead of 1095-C Part III.

Deadlines for the 2025 Reporting Year

ACA reporting carries two deadlines: one for giving employees their statements, and one for filing with the IRS.

For the 2025 calendar year, reported during 2026, the IRS automatically extended the employee furnishing deadline from January 31 to March 2, 2026.⁴ Every full-time employee must have Form 1095-C (or Form 1095-B, if applicable) by that date.

The general IRS paper filing deadline is February 28. Because that date falls on a Saturday in 2026, paper filers get until March 2, 2026. Electronic filers have until March 31, 2026.⁴ Any deadline that lands on a weekend or legal holiday shifts to the next business day.

Need more time? File Form 8809 for an automatic 30-day extension. No justification is required for the initial request; submit it through the IRIS portal, the FIRE system, or on paper before the original due date.⁶ A second 30-day extension exists but must be filed on paper with a written explanation.

Electronic Filing Is Required for Most

Most employers must file ACA returns electronically through the IRS’s Affordable Care Act Information Returns (AIR) system. E-filing is required once you file 10 or more information returns in total across all types, counting W-2s filed with the Social Security Administration, 1099s, and ACA forms together.⁷ An ALE clears that threshold on ACA forms alone, so paper filing is realistically available only to very small self-insured employers.

The Affordability Test and the Three Safe Harbors

ALEs must offer at least one plan that is both affordable and provides minimum value. For plan years beginning in 2026, coverage is affordable if the employee’s required contribution for the lowest-cost self-only option does not exceed 9.96% of household income.⁸ That’s up from 9.02% for 2025.

Employers don’t know their workers’ household incomes. The IRS built three safe harbors so you can prove affordability using data you actually have.⁹

W-2 safe harbor: coverage is affordable if the employee’s annual self-only cost stays within 9.96% of their Box 1 W-2 wages. You can’t confirm this until year-end, so it works best as a backward-looking check.
Rate of pay safe harbor: multiply the hourly rate by 130 (or use monthly salary), then check whether the required contribution exceeds 9.96% of that number. This one works in real time and is the most commonly used.
Federal poverty line safe harbor: coverage is affordable if the employee’s cost stays within 9.96% of the federal poverty level for one person. For 2026, that draws on the 2025 mainland poverty guideline of $15,650, putting the monthly cap around $130.

You can pick a different safe harbor for different employees and different months. Whichever you use, the employee’s required contribution goes on Line 15 of Form 1095-C.

Penalty Exposure

ACA reporting sits on top of two separate penalty regimes. One targets the underlying coverage; the other targets the paperwork.

Section 4980H Shared Responsibility Penalties

Under Section 4980H(a), if you fail to offer minimum essential coverage to at least 95% of your full-time employees (or all but five, whichever is greater) and at least one full-time employee receives a premium tax credit through the marketplace, the 2026 penalty is $3,340 per full-time employee for the year.¹⁰ The first 30 employees are excluded from the count. An employer with 200 full-time employees would calculate on 170.

Under Section 4980H(b), if you offer coverage but it’s unaffordable or doesn’t provide minimum value, and an employee enrolls in subsidized marketplace coverage as a result, the 2026 penalty is $5,010 per affected employee.¹⁰ The 4980H(b) penalty applies only to the employees who actually received subsidies, which is why it can end up smaller than 4980H(a) despite the higher per-person amount. Both are calculated monthly at 1/12 of the annual figure and are not tax-deductible.

Filing and Furnishing Penalties

Separately, Sections 6721 and 6722 impose per-return penalties for failing to file correct returns with the IRS or furnish correct statements to employees. For returns due in 2026:¹¹

Filed within 30 days of the deadline: $60 per return, up to $683,000 annually
More than 30 days late but filed by August 1: $130 per return, up to $2,049,000 annually
After August 1 or not filed at all: $340 per return, up to $4,098,500 annually
Intentional disregard: $680 per return, no annual cap

Those caps apply to employers with gross receipts above $5 million. Smaller employers face the same per-return amounts but lower annual maximums of $239,000, $683,000, and $1,366,000 across the three tiers.¹¹ The structure applies again, separately, to the failure to furnish correct statements to employees, so one botched return can produce two penalties.

If the IRS Sends Letter 226-J

When the IRS concludes an ALE owes a shared responsibility payment, it sends Letter 226-J. The letter states the proposed amount, lists the employees who triggered it, and includes Form 14765 identifying which months and which employees are at issue.¹²

The letter carries a specific response deadline. You must complete and return Form 14764, the ESRP Response Form, by that date whether you agree or disagree. If you agree, sign and pay. If you disagree, explain in detail on the response form, mark which entries on Form 14765 need correction, and return everything on time.¹² Many 226-J assessments trace back to data mismatches rather than actual coverage failures, and reviewing Form 14765 line by line is where most get reduced or eliminated. Ignore the letter and the IRS treats the proposed amount as final.

1
Internal Revenue Service. Determining if an Employer Is an Applicable Large Employer
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Internal Revenue Service. Identifying Full-Time Employees
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Internal Revenue Service. Information Reporting by Providers of Minimum Essential Coverage
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Internal Revenue Service. 2025 Instructions for Forms 1094-C and 1095-C
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Internal Revenue Service. Instructions for Forms 1094-B and 1095-B (2025)
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Internal Revenue Service. Form 8809 – Application for Extension of Time To File Information Returns
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Internal Revenue Service. Affordable Care Act Information Returns (AIR)
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Internal Revenue Service. Rev. Proc. 2025-25
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Internal Revenue Service. Minimum Value and Affordability
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Office of the Law Revision Counsel. 26 USC 4980H – Shared Responsibility for Employers Regarding Health Coverage
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Internal Revenue Service. 20.1.7 Information Return Penalties
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Internal Revenue Service. Understanding Your Letter 226-J