ACA Reporting Penalties Increased In New Trade Bill

The trade bill recently signed into law included provisions steeply increasing the penalties related to employers’ Affordable Care Act (ACA) reporting.

Large employers (employers with 50 or more FTEs) are required to provide information on health coverage to their employees using Form 1095-C; they must further file this information with the IRS using Form 1094-C.  If an employer fails to provide and/or file the forms, the employer is subject to IRS penalties.

The trade bill made steep increases in the penalties for reporting failures. In addition to applying to Forms 1094-C and 1095-C, these increased penalties also apply to other information returns and filings required to be filed or furnished after 2015, such as W-2s.

  • The general penalty for failure to file will increase from $100 per return to $250 per return.
  • The cap on the total amount of penalties for such failures during a calendar year will increase from $1,500,000 to $3,000,000.
  • If a failure relates to both an information return (e.g., a Form 1094-C required to be filed with the IRS) and a payee statement (e.g., Form 1095-C required to be furnished to the individual), the penalties may be doubled.

If a failure is caused by intentional disregard, the new $250 penalty is doubled to $500 for each failure, and no cap applies to limit the amount of penalties that can be applied with respect to that calendar year.

The IRS has stated that it will not penalize employers who  “make good faith efforts to comply” with the ACA reporting requirements. Therefore, employers should document their efforts to comply with the ACA reporting requirements to avail themselves of a “good faith” compliance defense, if need be, against any assessed “failure to file penalties.”