Applicable Large Employer’s Guide for Correcting ACA Forms and Closing Out The Reporting Year

Here are the top 5 causes for the IRS to respond with a rejection or failed validation status:

1. The submission was not formatted correctly following the updated specifications and therefore is not readable by the AIR program.
2. The 1094-C transmittal errored due to an incorrect employer name, FEIN, or both.
3. There was an unacceptable character on one or more 1095-C forms. The “*” on one 1095-C would cause the entire submission to be rejected. For example, the address line displays 145* West 32nd Street.
4. A series of commingled forms 1094/1095-B and forms 1094/1095-C are not allowed.
5. The reported checksum must match the IRS calculated checksum, meaning that the number of forms submitted should match what is indicated on the 1094 form and what the AIR program counts. 

If the IRS has responded with a Receipt ID and “Accepted with Errors,” it is the employer’s due diligence to review those errors, make the proper corrections, and resubmit those corrected forms to both the IRS and the employee in question; if appropriate. Remember that corrections can only be made to previous transmissions that have been “Accepted,” “Accepted with Errors,” or “Partially Accepted,” and the “corrected” box must be checked on the top of the form. 

With the recent allocation of $80+ billion to the IRS over the next ten years, it is anticipated that the enhancements made to their operations with this funding will lead to auditing and penalizing for anything deemed non-compliant, including data accuracy. Therefore, employers must correct any errors, including name and social security number mismatches. If the employer confirms that the data provided is valid for name and SSN errors, they should make a note for their records and not correct the 1095-C form. Corrections can be made for the 1094-C, 1095-B, and 1095-C forms only, and these are the sections that can be fixed:

1094-C Correctable Fields:

1. ALE Member or Designated Government Entity (Name and/or EIN)
2. Total number of Forms 1095-C filed by and/or on behalf of ALE Member
3. Aggregated ALE Group Membership
4. Certifications of Eligibility
5. Minimum Essential Coverage Offer Indicator
6. Section 4980H Full-Time Employee Count for ALE Member
7. Aggregated Group Indicator
8. Other ALE Members of Aggregated ALE Group (Name and/or EIN)

1095-B Correctable Fields:

1. Part I – Name, SSN, DOB, Address, City, State, Zip, Origin of the Health Coverage
2. Part II – Employer Name, EIN, Employer Address, City, State, Zip
3. Part III – Issuer or Other Coverage Provider’s Name, EIN, Employer Address, City, State, Zip
4. Part IV – the coverage indicators

1095-C Correctable Fields:

1. Part I – Employee’s and ALE’s Name, SSN, EIN, Address, City, State, Zip
2. Part II - Indicator Codes for lines 14 and 16, Employee-only contribution amounts, Zip

ALEs should note that all corrections should be completed by the official deadline of March 31st. Any submission after March 31st will be considered late and subject to late penalties.  Another important note is that inaccurate reporting is subject to a dual penalty, which includes one penalty for filing to the IRS and another for distributing the incorrect form to your employees. Penalties for inaccuracies on the 1095c forms are the same for filing and distributing, with a fee of $290 for each inaccurate form, capped at $3,532,500.00 annually. However, these penalties are assessed separately, meaning the IRS may charge penalties for a maximum of 12,181 forms, totaling $7,065,000. 



After confirming an “Accepted” or “Accepted with Errors” status and a Receipt ID, ALEs should prepare to close the reporting year.  ALEs should retain the following records for at least three years but a suggested seven years if possible.  

Records ALEs should retain:

1. PDF version of 1094-C
2. PDF version of all 1095-Cs
3. PDF version of Transmission Reports
4. PDF version of IRS Communications
5. PDF version of errors received.
6. XML data for the response from IRS
7. XML data for the manifest file (goes with the data file)
8. XML data for the data file (1095-c and 1094-C)

Employers that utilize a 3rd party solution should have this available to them, and it is recommended to save a copy from the software they are operating. Congratulations, you have completed your ACA filing and are ready to catch up with the data you put aside for the past three months. Don’t procrastinate; you will thank me later.

Here are the recommended steps to complete:

1. Gather data including Census, Plan, Offers, and Payroll.
2. Confirm that you have all data from January 1st to the current date.
3. Review data for accuracy and upload it into your ACA solution.
4. Confirm that all edits processed during the previous year’s filings have been permanently changed in your source data, for example, the “*” that caused a rejected status.  Confirming these edits to the source data will ensure that your data moving forward is correct.

Employers that have followed the suggested processes have successfully avoided penalties associated with ACA Reporting and found that each reporting year becomes easier.  It may seem like much work, as does anything new and unknown, but once you start and follow the guided steps, you will find it easily doable and much satisfaction in keeping your business compliant and penalty-free.

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