1095-C ACA reporting requirements and 2022 updates for employers

Executive overview

Employers with 50 or more full-time equivalent employees must file Form 1095-C annually to demonstrate ACA compliance. Missing deadlines or filing inaccurate forms now carries real penalties — up to $560 per employee. For 2022, the IRS made three concrete changes that affect every applicable large employer.

Good faith relief is gone: accurate 1095-C filing is now mandatory with no penalty waiver.

ALE status and 1095-C basics

• Applicable large employers (ALEs) employ 50+ full-time equivalents on average during the prior year
• Full-time = 30+ hours/week or 130+ hours/month; two 15-hr/week workers = one FTE
• ALEs must file a 1095-C for every worker employed during the year, not just current employees
• Form communicates health coverage details to the IRS and determines employee subsidy eligibility
• Employees offered qualified coverage are ineligible for marketplace subsidies in those months
• Employers who failed to offer qualified coverage and whose employee claimed a subsidy face a penalty

Filing deadlines and penalties

• Furnishing deadline to employees: March 2nd (permanently extended from prior temporary extensions)
• Paper filing deadline with IRS: February 28th
• E-filing deadline: March 31st
• Employers filing 250+ forms must e-file; e-filing recommended for all
• Penalty for failing to furnish to employee: $280 per employee
• Penalty for failing to file accurate form with IRS: $280 per employee
• Penalty for failing to e-file when required: $280 per return (total cap $3,392,000/year)

Three 2022 changes

• New codes 1T and 1U added to Part 2 for individual coverage HRAs (ICHRAs) offered to employee and spouse, but not dependents
• Code 1T: ICHRA affordability determined by zip code of employee's primary residence
• Code 1U: ICHRA affordability determined by zip code of the employment site
• Furnishing deadline permanently set at March 2nd — no annual extension needed going forward
• No filing deadline extension in 2022 (unlike prior years)
• Good faith relief ended: IRS will now enforce penalties for incorrect or incomplete filings

ICHRAs and affordability

• ICHRAs are account-based plans letting employers provide defined, non-taxed reimbursements for qualified health expenses
• Eligible expenses include individual plan premiums purchased through the marketplace or private insurers
• Affordability based on three factors: employer contribution, employee income, plans available in employee's area
• Prior codes 1L–1S already covered ICHRA affordability; 1T and 1U extend coverage to spouse-only scenarios