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It’s Affordable Care Act Filing Season — What Employers Should Know

January 16, 2026

By Allisyn Keyser Byrne, CPA

This time of year, many CPAs are focused on helping their clients execute useful tax strategies while completing or extending all relevant tax filings for the calendar year. However, some employer-related tax forms that might get overlooked are the Form 1094 and 1095 series.

Enacted as part of the Affordable Care Act (ACA), the annual requirements to furnish the IRS and employees with the 1094/1095 forms can fluctuate for an employer based on its headcount in a given calendar year.

Applicable large employers (ALE) as well as certain self-insured plans are subject to Form 1094/1095 filing requirements. An ALE is an employer with an average of at least 50 full-time equivalent (FTE) employees during the preceding calendar year. In addition to conventional arrangements, other plans subject to filing requirements may include Individual Coverage Health Reimbursement Arrangement plans and level-funded plans.

How can a business accurately determine its FTE headcount?

“Full time” means an employee works an average of at least 30 hours per week, or 130 hours per  calendar month.

In general, to determine the number of FTE employees in your organization:

  1. Add up the hours of all part-time employees for each month of the prior year
  2. Divide the Step 1 total by 120 to convert part-time hours into FTE count
  3. Add the number of full-time employees to Step 2 total
  4. Divide by 12 to average across all 12 months
  5. If the Step 4 average is greater than 50, the employer is an ALE for the current year

As an example, if the 2024 payroll hours result in a headcount of at least 50 FTEs, then an employer would be considered an ALE for 2025, with ACA filings due in early 2026.

How do seasonal employees affect headcount?

With many employers operating seasonally based on geographic circumstances or operational fluxes, determining ALE status is not always straightforward.

There is an exception to ALE status if both of the following conditions are met: (1) headcount exceeds 50 for 120 days or fewer during the year, and (2) the employees in excess of 50 during such 120-day period are seasonal workers.

The IRS defines seasonal workers for this purpose as employees who perform labor or services on a seasonal basis and lists retail employees employed exclusively during the holidays as an example of seasonal employees.

What type of coverage must an ALE provide?

Under the employer shared responsibility provisions, ALEs must offer what’s referred to as minimum essential coverage to at least 95% of full-time employees. This means the coverage is both “affordable” and provides “minimum value.” Failure to offer minimum essential coverage can result in IRS penalties. Individuals aren’t required to have minimum essential coverage when filing their individual 1040s.

How affordability is determined

Employer-provided coverage is considered affordable if the employee’s required contribution is no more than 9.5% (as adjusted, referred to as the applicable percentage) of that employee’s household income. Because employers are not likely to know the household income of their employees, there are three safe harbor methodologies an employer may use to determine affordability:

  • The federal poverty line methodology is based on the employee’s required monthly contribution for self-only coverage, compared to applicable percentage of the federal poverty line for a single individual for that year, divided by 12.
  • The W-2 wages methodology is based on an employee’s W-2, Box 1 wages from an employer, which is multiplied by the affordability percentage. The resulting calculation is compared to the employee’s cost for the least  expensive self-only plan offered by the employer.
  • The rate of pay safe harbor generally is based on the employee’s rate of pay at the beginning of the coverage period, with adjustments permitted, for an hourly employee, if the rate of pay is decreased (but not if the rate of pay is increased).

What is minimum value?

In general, an employer-sponsored plan provides minimum value if it covers at least 60% of the total allowed cost of benefits expected to be incurred under the plan. Employers generally must use a minimum value calculator developed by U.S. Department of Health and Human Services (HHS) to determine if a plan with standard features provides minimum value. Plans with nonstandard features are required to obtain an actuarial certification for the nonstandard features.

What are the ACA filing requirements? 

ALEs and other providers of minimum essential coverage are required to annually report information for each covered individual to the IRS and provide statements showing proof of minimum essential coverage to individuals.

ALEs generally use Forms 1094-C and 1095-C to meet these requirements. These forms provide the information the IRS needs to administer employer shared responsibility penalties and eligibility for premium tax credits. Form 1094-C is used to report summary information and to transmit Forms 1095-C to the IRS. Form 1095-C is used to report employee-level coverage information to both the IRS and the employee.

Generally, other providers of minimum essential coverage such as health insurance companies, small employers, and governmental employers file and furnish B series forms in order to meet their information requirements. Form 1094-B is used to report summary information and to transmit Forms 1095-B to the IRS (similar to the 1094-C). Form 1095-B is used to report coverage information to covered individuals and the IRS 
(B-series forms are not required for those who received an offer of minimum essential coverage but did not enroll).

Special considerations for ACA reporting

One special consideration related to ACA reporting is whether employers offer self-insured coverage or fully insured coverage. Self-insured health plans may require additional information related to dependents who were enrolled or declined offers of coverage.

There can also be implications for ACA reporting if an ALE has multiple entities operating under different EINs, assuming the entity exceeds the 50 full-time employee threshold. If a full-time employee moves to a different entity during the year, it’s important to track offers of coverage to the employee for each entity.

Working with payroll providers

Many payroll processing companies include the preparation and filing of the 1094 and 1095 series as part of their service offerings; however, there is typically no guarantee related to the accuracy or completeness of the information.

As such, CPAs working with clients that might be considered an ALE for 2025 should ask about the required 1094 and 1095 filings — and what their clients’ plans are to comply with those requirements.