Affordable Care Act (ACA) Information Reporting Penalties (IRP)
The State of California (state) is subject to the Affordable Care Act’s (ACA) Employer Shared Responsibility provision which requires large employers to offer affordable health coverage that provides minimum value to at least 95 percent of its full-time employees and their dependents to avoid a penalty assessment.
To demonstrate compliance, the state is required to file information returns with the Internal Revenue Service (IRS) and provide a 1095-C statement to full-time employees with information about the health coverage offered to the employee for each month during the preceding calendar year.
Not only is the state subject to penalties for failure to offer affordable and minimum value health coverage to 95 percent of its full-time employees under the Employer Shared Responsibility provision, but the state may be subject to Information Reporting Penalties (IRP) for each failure to file a correct 1095-C statement with the IRS and each failure to furnish a correct 1095-C statement to the employee.
Human Resource staff are responsible for capturing accurate health benefit status data (e.g., offer of health coverage, acceptance of health coverage, etc.) in the Affordable Care Act System (ACAS). The State Controller’s Office (SCO) uses the ACAS data to report information to the IRS to demonstrate the state’s ACA compliance. The state may be subject to penalties if incorrect information in the ACAS is reported on the 1095-C statements.
Additionally, the state may be subject to IRPs when a retroactive change is processed in the ACAS that causes a corrected 1095-C to be issued to the IRS and employee via the SCO correction process.
Starting with the correction process for the 2021 reporting year, the IRS is no longer providing relief to employers for incorrect reporting on the 1095-C statements for ACA purposes. The state may be assessed IRPs for any corrected 1095-Cs beginning when SCO submits the 2021 corrected 1095-Cs to the IRS.
2021 IRP Amounts for each corrected 1095-C:
- $280: Failure to file a correct 1095-C with the IRS
- $280: Failure to provide a correct 1095-C to the employee
- Total: $560 per corrected 1095-C
The IRS has provided penalty relief for several years since the enactment of the ACA reporting requirements. It is important to note that this relief is no longer available beginning with corrections to the 1095-C statements for the 2021 reporting year.
The following are the IRP amounts for each reporting year:
|
Year
|
Failure To File a Correct
1095-C With The IRS
|
Failure To Provide a Correct
1095-C To Employee
|
Total Penalty
|
|---|---|---|---|
| 2021 | $280 | $280 | $560 |
| 2022 | $290 | $290 | $580 |
| 2023 | $310 | $310 | $620 |
| 2024 | $330 | $330 | $660 |
To encourage Human Resource (HR) offices to make retroactive changes in the ACAS, SCO is using a phased approach to assess IRPs for the 2021 and 2022 reporting years.
SCO will assess IRPs to HR offices at fault, as follows:
- Correction Reporting Year 2021: HR offices will be responsible for paying 50% of the total penalty amount assessed.
- Correction Reporting Year 2022: HR offices will be responsible for paying 75% of the total penalty amount assessed.
- Correction Reporting Year 2023 and Moving Forward: HR offices will be responsible for paying 100% of the total penalty amount assessed.
The table below provides an example of how the Phased Approach provides additional relief for correction reporting years 2021 and 2022 IRPs assessed. This is based on data from the top three state departments and California State University (CSU) campuses with the greatest number of corrected 1095-C statements for the 2020 reporting year and is provided to demonstrate how the Phased Approach reduces HR offices overall penalty expense.
For outstanding errors in the ACAS that impact the correction process for the 2021 and 2022 correction reporting years, penalties will be assessed at a reduced rate (50% for 2021 and 75% for 2022 with the phased approach).
2020 Corrected Penalty Data for Departments – Phased Approach
| Department | # of Penalties Assessed | Total Penalty at 50% for 2021 | Total Penalty at 75% for 2022 | Total Penalty at 100% for 2023 & Moving Forward |
|---|---|---|---|---|
| Department A | 161 | $43,470 | $65,205 | $86,940 |
| Department B | 83 | $22,410 | $33,615 | $44,820 |
| Department C | 78 | $21,060 | $31,590 | $42,120 |
2020 Corrected Penalty Data for CSU Campuses – Phased Approach
| Campus | # of Penalties Assessed | Total Penalty at 50% for 2021 | Total Penalty at 75% for 2022 | Total Penalty at 100% for 2023 & Moving Forward |
|---|---|---|---|---|
| Campus A | 108 | $29,160 | $43,740 | $58,320 |
| Campus B | 98 | $26,460 | $39,690 | $52,920 |
| Campus C | 81 | $21,870 | $32,805 | $43,740 |
It is important to enter relative health benefit status data for employees in the ACAS in the pay period in which they are effective. For ACAS updates that may have been missed or entered in error and reflected on the monthly compliance reports, it is important that HR offices take action to correct all errors in the ACAS within 30 days of receipt of the reports and before the state reports information to the IRS (refer to the California Department of Human Resources – Human Resources Manual (1402 – Affordable Care Act). The longer the errors are on the compliance reports, the greater the impact they will have on HR offices. Not only will the errors potentially increase the exposure to IRPs, but they may also require more complicated updates in the ACAS.
IRPs will continue to compound if errors remain uncorrected in the ACAS and impact multiple reporting years.
Below is an example of how IRPs compound over time:
Example 1: Department/Campus made an update to an employee’s ACA health benefit status in 2024 that dated back to reporting year 2021. When the change was made, it resulted in a 1095-C correction for reporting years 2021, 2022, and 2023.
Resultant Penalties Compounded:
| Corrected 2021 1095-C | $560.00 |
| Corrected 2022 1095-C | $580.00 |
| Corrected 2023 1095-C | $620.00 |
| Total Penalties Compounded | $1,760.00 (estimated) |
Example 2: Department/Campus made an update to an employee’s ACA health benefit status in 2023 that dated back to reporting year 2021. When the change was made, it resulted in a 1095-C correction for reporting year 2021 and 2022.
Resultant Penalties Compounded:
| Corrected 2021 1095-C | $560.00 |
| Corrected 2022 1095-C | $580.00 |
| Total Penalties Compounded | $1,140.00 (estimated) |
Example 3: Department/Campus made an update to an employee’s ACA health benefit status in 2022 that dated back to reporting year 2021. When the change was made, it resulted in a 1095-C correction for reporting year 2021.
Resultant Penalties Compounded:
| Corrected 2021 1095-C | $560.00 |
| Total Penalties Compounded | $560.00 (estimated) |
HR offices will have the opportunity to review the corrected records submitted to the IRS for each reporting year. If HR offices disagree with the IRP assessed, they will have an opportunity to appeal through the IRP appeal process.
**Coming Soon**
FAQs – Frequently asked questions regarding IRPs.
IRP Helpdesk Inbox: PPSDACAIRP@sco.ca.gov - Contact for all IRP-related questions, concerns, and appeal submissions
IRP Virtual Overview Training **Coming Soon** – IRP Process Overview
ACA Helpdesk: ACASupport@sco.ca.gov or 916-322-3770 – Contact for all ACAS-related questions or concerns
Affordable Care Act (ACA) Training – ACA Policy and ACAS training resources
Mobius View (ca.gov) – Monthly and quarterly compliance reports (login required)
Information Return Penalties | Internal Revenue Service (irs.gov) – IRS Information on IRPs