ACA Employer Reporting for Medical Practices (Forms 1094 and 1095)

Every January and February, medical practices with 50 or more full-time equivalent employees run through the same annual exercise: Forms 1094-C and 1095-C, the Affordable Care Act’s employer reporting regime. The forms themselves are routine. The determination of whether a practice is an Applicable Large Employer (ALE) in the first place, and which affiliated entities aggregate with it for that determination, is where practices routinely get burned.

For a medical group in Idaho or Utah with two or three related entities (a professional corporation for clinical work, a management LLC, a real estate holding company), the aggregation rules can flip a “not an ALE” answer to “ALE with penalty exposure” almost without notice. This piece walks through how ALE status is determined, the aggregation rules physicians miss, what the forms actually report, deadlines and penalty structure, and the state add-on reporting practices in some states also owe.

How ALE Status Is Determined for a Medical Group

An Applicable Large Employer is one that employed an average of at least 50 full-time employees (or full-time equivalents) on business days during the preceding calendar year. Full-time employees are those averaging at least 30 hours per week; full-time equivalents are computed by aggregating part-time employee hours and dividing by 120 per month.

A single-entity practice with 45 physicians, nurses, and staff members might not clear the threshold. Add a management company with additional employees or aggregate a related entity, and the answer can change.

The determination is made on the prior year’s numbers. A practice that grew across the ALE threshold last year is an ALE this year, regardless of current-year headcount.

The Aggregation Rules Physicians Miss

The ACA uses the same “controlled group” and “affiliated service group” rules that apply throughout the Internal Revenue Code. If two or more entities are under common control, or provide services to each other in ways that trigger the affiliated service group rules, their employees aggregate for ALE determination.

Common medical-group structures that aggregate:

• A PC or PLLC and a management LLC owned by the same physicians
• Multiple PCs owned by overlapping physician groups
• A practice and its imaging center joint venture where the practice has substantial ownership
• A practice and its real estate holding LLC (though the holding LLC typically has zero employees, so the aggregation may not change the answer)

The determination requires looking at every entity a physician-owner has an interest in, not just the practice itself. Practices that never asked the question sometimes discover they have been an ALE for two or three years without filing.

Form 1094-C and Form 1095-C in Plain Language

Form 1094-C is the transmittal form: it reports the ALE’s aggregate information (employee count by month, minimum essential coverage offer, and any aggregation members).

Form 1095-C is the individual-employee form. Each full-time employee receives one, and each is filed with the IRS. It reports each month whether the employee was offered coverage, whether the coverage was affordable, and whether the employee enrolled.

The forms themselves are not complicated. Getting the codes right on Form 1095-C (particularly the offer-of-coverage code and the safe harbor code for affordability) is where mistakes happen and where subsequent IRS notices originate.

The Deadlines and Penalty Structure

ACA reporting has two key deadlines each year: furnishing Forms 1095-C to employees (typically end of January or early March depending on the year’s specific rules), and filing Forms 1094-C and 1095-C with the IRS (electronically, typically end of March). Verify the current-year deadlines before assuming last year’s dates still apply.

Penalties come from two sources:

Failure to file or furnish penalties. Assessed per form. Modest for small numbers of late forms; substantial for large numbers or intentional disregard.

Employer shared responsibility (ESR) penalties under §4980H. These are the larger risk. Section 4980H(a) applies when an ALE fails to offer minimum essential coverage to at least a threshold percentage of full-time employees. Section 4980H(b) applies when coverage is offered but is unaffordable or does not provide minimum value, and at least one employee receives a premium tax credit through the marketplace. Both penalties are indexed annually; verify current amounts.

State Add-On Reporting You Cannot Skip

Several states have their own individual mandate and reporting regime that runs in parallel with the federal ACA reporting: California, District of Columbia, Massachusetts, New Jersey, and Rhode Island. Practices with employees in those states owe additional filings and may need to send state-specific versions of Form 1095 to affected employees.

Idaho and Utah do not currently have state-level individual mandates or their own 1095 filing regime. Practices with employees who work remotely in another state should check that state’s rules; the practice’s obligation follows the employee’s work location, not just the practice’s home state.

Cooper Norman’s tax planning team runs ALE determinations, aggregation analyses, and 1094/1095 filings for medical practices across Idaho and Utah. This overview is general information, not tax advice for your specific practice. Talk with a Cooper Norman advisor about your practice’s ACA obligations.