With 2026 underway, employer health coverage reporting obligations under the Affordable Care Act’s (ACA) Employer Shared Responsibility (ESRP) provisions are coming due. This timing serves as an important reminder that the Paperwork Burden Reduction Act (H.R 3797) and the Employer Reporting Improvement Act (H.R. 3801), both of which took effect in 2025, introduced alternative methods for certain employers to satisfy ACA reporting requirements. These changes are intended to streamline compliance and reduce administrative burden, as reflected in IRS Notice 2025-15.
The ACA, indicates that certain employers are required to provide each applicable employee who received health insurance a Form 1095-B (Health Coverage) or Form 1095-C (Employer Provided Health Insurance Offer and Coverage) as applicable. A copy must also be submitted to the IRS with a Form 1094-B (Transmittal of Health Coverage Information Returns) and Form 1094-C Transmittal Employer Provided Health Insurance Offer and Coverage, as applicable.
These reporting requirements apply to employers who are considered an Applicable Large Employer (ALE) in a prior year, generally those with 50 or more full-time employees (defined as employees working on average at least 30 hours per week, including full-time equivalent employees), and who have had employees considered full-time in any month in 2025, regardless of whether the employer is self-funded or fully insured. ALEs generally must provide Form 1095-C to each applicable employee by the annual deadline.
The reporting requirement also applies to employer sponsors of a self-insured health plans that covered employees in 2025, no matter whether the employer is an ALE or not and health insurance providers. Covered individuals must be provided with a Form 1095-B by the applicable deadline. ALEs may also provide Form 1095-B to certain non-employees.
Reminder: Alternative Reporting Method Available
As of 2025, employers have an alternative method to satisfy the ACA reporting requirements. Employers are no longer required to provide Form 1095-B and 1095-C to employees annually by first-class mail or electronic delivery. Instead, under the Paperwork Burden Reduction Act (H.R. 3797), an employer will be deemed to have timely furnished Form 1095-B or Form 1095-C if, by March 2, 2026, the employer provides a clear, conspicuous, and accessible notice advising employees that they may request a copy of the applicable form.
This notice must remain accessible, conspicuous and clear until October 15, 2026. This can include posting a notice on the employer’s website advising employees who would be entitled to receive the form can be provided upon request. If an employee requests a copy of Form 1095-B or Form 1095-C, the employer must provide the requested form no later than January 31, 2026, or within 30 days of the request, whichever is later. If the employer prefers to deliver the forms electronically, employee consent is required, including from employees who request a copy.
Employers must still prepare and file Form 1095-B and Form 1095-C with the IRS. Electronic filings are due by March 31, 2026, which applies to most employers. Paper filings are due February 28, 2026; however, because that date falls on a weekend, the deadline is March 2, 2026. Form 1094-B (Transmittal of Health Coverage Information Returns) must be filed with Form 1095-B, and Form 1094-C (Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns) must be filed with Form 1095-C.
Several states, including California, Massachusetts, Rhode Island, New Jersey, and Washington D.C., have their own health insurance mandates and reporting requirements. Employers should also review applicable state-specific timelines and provisions as they may differ from ACA reporting deadlines and requirements.
Penalties for Failure to Comply
For ACA filings in 2026 relating to tax year 2025, Internal Revenue Code (IRC) Sections 6721 and 6722 impose penalties for the employer’s failure to provide timely file required information returns with the IRS and for failure to provide timely required forms to the applicable employees.
Employer Shared Responsibility Payment for ACA Violations
The ACA requires ALEs to offer minimum essential coverage to at least 95% of their full-time employees and dependents. An employer may be subject to an ESRP under IRC Section 4980H if it fails to offer coverage, offers unaffordable coverage, fails to provide minimum value, or if a full-time employee receives a premium tax credit for Marketplace coverage. Under this provision, the IRS can provide the employer with a proposed assessment of the ESRP payment amount for the failure to comply with the ACA.
Employers should carefully complete Form 1094-C and 1095-C, which documents the employer’s health coverage offers. If the IRS determines the employer has not provided the required ACA health coverage to its employees, the IRS may send the employer an IRS Letter 226J with an ESRP proposed assessment and ESRP Response Form14764 and Form 14765 (Employer Premium Tax Credit Listing). Employers may agree or object to the proposed assessment and must respond timely. If the employer agrees with the proposed ESRP assessment, the employer must timely complete IRS ESRP Response Form 14764 and remit payment for the proposed assessment.
If the employer objects to the IRS ESRP proposed assessment, the employer should review its Forms 1095 and provide an explanation of why they disagree with the proposed assessment, timely complete ESRP Response Form 14764, and correct the information provided by the IRS on Form 14765, Employer Premium Tax Credit (PTC) Listing. After the employer files an objection, the IRS will follow up with an IRS Letter 227 regarding the proposed assessment, along with an ESRP Summary Table reflecting their response. If the employer continues to object, it may request a meeting or call with the IRS or, if no resolution is reached or a meeting is not wanted, the employer may request a conference with the IRS Office of Appeals.
If the employer does not timely respond to the IRS Letter 226J proposing ESRP assessment or the IRS Letter 227 reflecting the IRS’s response, the IRS will issue a notice and demand for payment of the ESRP under Notice CP220.
The amount of the ESRP penalty assessed by the IRS depends on the nature of the ACA compliance failure. For 2026 filings, if the IRS determines that the employer failed to offer health coverage to substantially all full-time employees, the penalty under IRC Section 4980H(a) is $3,340 per full-time employee, excluding the first 30 employees, if any employees obtained coverage through the ACA Marketplace. If, however, the failure is due to the employer’s lack of affordable coverage or to provide minimum value coverage, the penalty under IRC Section 4980H(a) about $5,010 for each full-time employee who receives an ACA premium tax credit through the Marketplace.
Recent statutory changes under the Paperwork Burden Reduction Act and the Employer Reporting Improvement Act provide employers with 90 days, rather than 30 days, to respond to a proposed ESRP assessment. The Employer Reporting Improvement Act also extends the IRS statute of limitations to six years from the later of the due date or filing date of Form 1095-C.
How Frier Levitt Can Help
Frier Levitt’s ERISA and employee benefits attorneys assist employers with ACA reporting and compliance, including evaluating reporting requirements, drafting employee consent forms, and responding to proposed Employer Shared Responsibility Payment assessments from the IRS. If you have questions about ACA obligations or need guidance navigating enforcement and reporting issues, our team is available to help.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.
