Affordable Care Act (ACA) compliance has become a critical responsibility for applicable large employers (ALEs). One of the most complex parts of this process is preparing and filing Form 1095-C. This is where 1095-C software plays a vital role.
Modern form 1095-C software helps employers generate accurate forms, validate employee data, meet IRS requirements, and file electronically without errors. In this guide, we’ll explore what 1095-C software is, how it works, its benefits, types, costs, regulations, industries that use it, and answers to common FAQs.
What Is 1095-C Software?
1095-C software is a specialized compliance tool designed to help employers prepare, manage, and file IRS Form 1095-C. This form reports employer-provided health insurance coverage under the Affordable Care Act.
Unlike manual spreadsheets, software for 1095-C reporting automates eligibility tracking, coverage codes, affordability calculations, and IRS e-filing. It ensures that employers remain compliant with ACA Section 6056 reporting requirements.
What Does Form 1095-C Report?
Form 1095-C reports:
- Employer-offered health coverage
- Employee eligibility and enrollment
- Safe harbor and affordability codes
- Monthly coverage details
Using 1095-C software minimizes errors that could lead to IRS penalties.
Why Employers Need 1095-C Software
ACA reporting is not optional for ALEs. Filing incorrect or late forms can result in costly fines. This is why software 1095-C solutions are now considered essential rather than optional.
Key Compliance Challenges Without Software
- Complex IRS coding requirements
- Monthly data tracking errors
- Missed filing deadlines
- Difficulty correcting rejected forms
- Manual calculations increasing audit risk
With form 1095-C software, these challenges are handled through automation and built-in validation.
Benefits of Using 1095-C Software
Using dedicated 1095-C software offers multiple advantages for HR teams, payroll departments, and accountants.
Accuracy and Error Reduction
The software automatically applies IRS rules and validates line codes, reducing common filing mistakes.
Time and Cost Savings
Automated workflows significantly reduce time spent on data entry, corrections, and re-filings.
IRS-Ready Electronic Filing
Most 1095-C software platforms support direct IRS e-filing and employee statement delivery.
Scalability for Growing Businesses
Whether you have 50 employees or 50,000, software for 1095-C reporting scales easily.
Audit and Record Management
Secure data storage and reporting history simplify audits and future corrections.
Types of 1095-C Software
Different organizations have different needs. Below are the most common types of 1095-C software available.
Cloud-Based 1095-C Software
- Web-based access
- Automatic updates
- Ideal for remote teams
- No installation required
Payroll-Integrated 1095-C Software
- Syncs with payroll and HR systems
- Reduces duplicate data entry
- Ideal for mid-to-large employers
Standalone ACA Reporting Software
- Focused exclusively on ACA compliance
- Often preferred by CPAs and tax professionals
- Advanced reporting controls
Enterprise-Level ACA Compliance Platforms
- Supports Forms 1094-C and 1095-C
- Handles multi-EIN and multi-state employers
- Custom workflows and permissions
How 1095-C Software Works (Step-by-Step Process)
Understanding the workflow helps employers choose the right 1095-C software.
Step 1 – Data Collection
Employee demographics, employment status, and coverage data are imported from payroll or HR systems.
Step 2 – Eligibility & Coverage Tracking
The software tracks monthly eligibility and coverage offers using IRS-approved logic.
Step 3 – Code Assignment
Correct Line 14, 15, and 16 codes are automatically applied based on ACA rules.
Step 4 – Validation & Error Checks
Built-in validations flag missing or incorrect data before submission.
Step 5 – IRS E-Filing & Employee Delivery
Forms are electronically filed with the IRS and delivered to employees securely.
Cost of 1095-C Software
Pricing for software 1095-C solutions varies depending on features and scale.
Typical Pricing Models
- Per-form pricing
- Per-employee pricing
- Annual subscription plans
- Enterprise custom pricing
Factors That Affect Cost
- Number of employees
- Integration requirements
- Multi-EIN reporting
- E-filing and correction support
While free tools exist, professional 1095-C software often pays for itself by avoiding penalties.
IRS Regulations and Compliance Requirements
ACA reporting is governed by IRS Sections 6055 and 6056. 1095-C software ensures compliance with:
- IRS filing deadlines
- Electronic filing mandates (250+ forms)
- Affordability safe harbor rules
- Correction and replacement filing procedures
Failing to comply can result in penalties per form, making software for 1095-C reporting a risk-management necessity.
Industries That Commonly Use 1095-C Software
Many industries rely heavily on 1095-C software due to workforce size and complexity.
Healthcare Organizations
Hospitals and clinics manage large, variable-hour workforces.
Retail and Hospitality
Seasonal and part-time employees require accurate eligibility tracking.
Manufacturing
Shift-based employment increases ACA complexity.
Staffing and HR Firms
Multi-client reporting requires scalable form 1095-C software.
Accounting and CPA Firms
Professionals use 1095-C software to manage filings for multiple clients efficiently.
Challenges When Using 1095-C Software
While powerful, 1095-C software still requires careful use.
Data Accuracy Dependence
Incorrect source data can still lead to filing errors.
Learning Curve
Advanced platforms may require training for first-time users.
Integration Issues
Not all payroll systems integrate seamlessly with every software solution.
Choosing the right provider minimizes these challenges.
Future Trends in 1095-C Software
The future of software 1095-C is shaped by automation and regulatory changes.
AI-Driven Validation
Artificial intelligence will improve error detection and compliance accuracy.
Real-Time ACA Monitoring
Future tools will track eligibility continuously rather than annually.
Enhanced Employee Self-Service
Employees will access forms securely through portals and mobile apps.
Frequently Asked Questions (FAQs)
Who needs 1095-C software?
Applicable Large Employers (50+ full-time employees) benefit the most from 1095-C software.
Can small businesses use form 1095-C software?
Yes, especially those approaching ALE status or managing complex benefits.
Is electronic filing mandatory?
Yes, if you file 250 or more forms, IRS e-filing is required.
Can I correct rejected forms using the same software?
Most professional 1095-C software supports corrections and resubmissions.
Conclusion
ACA compliance doesn’t have to be overwhelming. The right 1095-C software simplifies reporting, reduces errors, and ensures IRS compliance while saving time and money. From payroll-integrated solutions to enterprise-grade platforms, there’s a form 1095-C software option for every organization.
If you’re responsible for ACA reporting, investing in reliable software for 1095-C reporting is not just smart—it’s essential for long-term compliance and peace of mind.
