ACA Tax Laws and Provisions 2025

The Affordable Care Act (ACA) introduced several tax provisions that significantly impact Applicable Large Employers (ALEs)—generally defined as organizations with 50 or more full-time employees, including full-time equivalent employees. These provisions encompass employer shared responsibility mandates, reporting obligations, and affordability thresholds. 2025 legislative changes have further refined these requirements, aiming to streamline processes and reduce administrative burdens.​

Employer Shared Responsibility Provisions

Under the ACA, ALEs are required to offer minimum essential coverage that is both affordable and provides minimum value to their full-time employees and their dependents. Failure to comply may result in employer shared responsibility payments. Specifically, if an ALE does not offer coverage to at least 95% of its full-time employees (and their dependents), and at least one full-time employee receives a premium tax credit for purchasing coverage through the Health Insurance Marketplace, the employer may be subject to a penalty. ​

ALE Reporting Obligations

Qualified Applicable Large Employers (ALEs) have specific annual reporting responsibilities to the Internal Revenue Service (IRS) regarding the health insurance coverage offered to their full-time employees. 

Traditionally, this involved providing Form 1095-C to each full-time employee and filing copies, along with Form 1094-C, with the IRS. 

However, recent legislative developments, particularly the enactment of the Paperwork Burden Reduction Act, have modified these requirements. As of the 2024 tax year, ALEs are no longer mandated to automatically distribute Form 1095-C to full-time employees unless the employee explicitly requests a copy. Despite this change, ALEs must still file Forms 1094-C and 1095-C with the IRS by the stipulated deadlines:

Furnishing Forms to Employees: March 3, 2025 (extended by one day due to March 2 falling on a Sunday).

 

• Filing with the IRS (Paper Filers): February 28, 2025.​ 
• Filing with the IRS (Electronic Filers): March 31, 2025. ​ 

Affordability Threshold Adjustment

The IRS annually adjusts the affordability threshold, which determines the maximum percentage of an employee’s household income that can be required for self-only coverage under an employer-sponsored plan to be considered affordable. 

For the 2025 tax year, the affordability threshold has been increased to 9.02%, up from 8.39% in 2024. 

This adjustment provides employers with greater flexibility when setting employee contribution rates for health coverage. 

Enhanced Premium Tax Credits

The American Rescue Plan Act initially enhanced premium tax credits to make ACA marketplace plans more affordable. These enhancements were extended through 2025 by the Inflation Reduction Act. These tax credits reduce the insurance premiums that enrollees pay based on their projected income for the next year. The credits are paid directly to health insurers, who in turn lower the monthly amounts they charge. The credit amounts then need to be reconciled with actual income at year’s end when enrollees file their federal taxes.

Key 2025 ACA Takeaways for ALEs

• Determine ALE Status: 

  • Annually assess your organization’s ALE status based on the preceding year’s employee count to understand your obligations under the ACA. ​IRS 

• Offer Compliant Coverage: 

  • Ensure that the health coverage offered meets the minimum essential coverage criteria, provides minimum value, and remains affordable under the updated 9.02% threshold for the 2025 tax year.  

• Adhere to Reporting Deadlines: 

  • While the requirement to furnish Form 1095-C to all employees has been relaxed, ALEs must still file the necessary forms with the IRS by the specified deadlines to remain compliant. ​ 

By staying informed about these provisions and adjustments, ALEs can effectively navigate their responsibilities under the ACA, ensuring compliance and optimizing the health benefits offered to their employees.