Form 1095-C Explained: What Applicable Large Employers Must Know in 2026

Every applicable large employer runs into Form 1095-C eventually, usually the first time a payroll or HR team asks who is responsible for filing it. The form itself is short, one page per full-time employee, but the codes on it summarize a full year of coverage offers, waiting periods, and affordability calculations. Getting it wrong does not just create paperwork. It can trigger IRS penalties separate from the employer mandate penalty itself.

This guide covers who has to file Form 1095-C, what the codes on Line 14 and Line 16 actually mean, the 2026 deadlines, and what the penalties look like if a form is late, missing, or wrong.

What Is Form 1095-C and Who Has to File It?

Form 1095-C, officially titled Employer-Provided Health Insurance Offer and Coverage, is the form an applicable large employer files under Internal Revenue Code Section 6056 to report what health coverage it offered to each full-time employee during the year. The IRS uses the form to check two things at once: whether the employer met its coverage obligation under the employer mandate, and whether an employee who bought subsidized marketplace coverage instead was actually entitled to do so.

An employer files one Form 1095-C per full-time employee, along with a single transmittal Form 1094-C summarizing the employer's full workforce. Small employers below the applicable large employer threshold generally do not file Form 1095-C at all, unless they sponsor a self-insured plan, in which case they file the simpler Form 1095-B instead. For background on the broader coverage requirement this form supports, see our <a href="/blog/aca-employer-mandate-2026-requirements">ACA employer mandate guide</a>.

Which Employers Must Send Form 1095-C in 2026?

An employer must file Form 1095-C if it averaged 50 or more full-time equivalent employees during the prior calendar year, the same threshold that makes an employer an applicable large employer under the ACA employer mandate. Full-time equivalent employees are calculated by combining actual full-time employees, those averaging 30 or more hours per week, with a fractional count built from part-time employee hours.

The calculation catches employers who assume they are too small to qualify. A retailer with 35 employees working 30 or more hours a week, plus enough part-time staff to add another 20 full-time equivalents, crosses the 50-employee threshold and becomes an applicable large employer even without a single employee change on paper. Employers close to the line should run the full-time equivalent count each year, since staffing changes can move a company across the threshold in either direction.

What Do the Codes on Line 14 and Line 16 of Form 1095-C Mean?

Line 14 reports what coverage an employer offered an employee each month, and Line 16 reports the safe harbor or other circumstance that applied that month, and the two lines are read together, not separately. Line 14 uses codes starting with 1, such as 1A for a qualifying offer of minimum essential coverage that meets minimum value at a cost at or below the mainland federal poverty line safe harbor amount, or 1E for coverage offered to the employee, spouse, and dependents. Line 16 uses codes starting with 2, such as 2C for an employee who was actually enrolled in the coverage that month, or 2F, 2G, and 2H for the three affordability safe harbors, W-2 wages, rate of pay, and federal poverty line.

For 2026 plan years, the ACA affordability percentage rises to 9.96% of household income, up from 9.02% in 2025, according to IRS Revenue Procedure 2025-25. Under the federal poverty line safe harbor, the maximum employee contribution for the lowest-cost self-only plan that still counts as affordable is $129.89 per month for plans beginning in 2026, up from $113.20 in 2025. An employer whose lowest-cost plan option charges more than that amount for employee-only coverage needs a different safe harbor code on Line 16 to avoid an affordability failure. Our <a href="/blog/section-125-cafeteria-plan-2026-guide">Section 125 cafeteria plan guide</a> covers how pre-tax premium elections interact with these affordability calculations.

When Is Form 1095-C Due in 2026?

For the 2025 coverage year, employers must furnish Form 1095-C to full-time employees by March 2, 2026, and file with the IRS by March 31, 2026 if filing electronically, or earlier if filing on paper. The furnishing deadline is technically January 31 each year, but a permanent 30-day extension to March 2 applies under IRS guidance issued after the standard deadline proved difficult for employers reconciling year-end enrollment data.

A 2024 federal law also changed how employers can furnish the form. Instead of automatically mailing a paper copy to every employee, an employer may post a clear, conspicuous notice on its website stating that employees can request a copy, then provide that copy within 30 days of a request or by January 31, whichever is later. Employers using this alternative method still must file all forms with the IRS on the standard schedule. Electronic filing with the IRS is mandatory for any employer filing 10 or more information returns in total across all form types, a threshold lowered from 250 in recent years, which means nearly every applicable large employer now files electronically.

What Happens If an Employer Files Form 1095-C Late or Incorrectly?

Late, missing, or incorrect Forms 1095-C trigger penalties under Internal Revenue Code Sections 6721 and 6722 that are separate from any employer mandate penalty owed under Section 4980H. For 2025 returns filed and furnished in 2026, the penalty is $340 per return for a full failure to file or furnish, according to IRS Revenue Procedure 2024-40. Employers who correct an error within 30 days of the deadline pay a reduced $60 per return, and corrections made after 30 days but before August 1, 2026 carry a $130 per return penalty. Intentional disregard of the filing requirement carries an uncapped penalty of at least $680 per return, or 10% of the amount that should have been reported if that figure is larger.

These penalties apply per form, so an employer with 200 full-time employees that misses the deadline entirely faces a $340 penalty for each of the 200 Forms 1095-C, plus a separate penalty for the transmittal Form 1094-C. Employers with average annual gross receipts under $5 million qualify for lower annual maximum penalty caps, but the per-form penalty rate is the same regardless of company size. Filing accurately the first time is almost always cheaper than correcting later.

How Does Form 1095-C Relate to a Section 125 Plan?

A Section 125 plan and Form 1095-C address two different questions, but the numbers on one directly affect the codes on the other. Form 1095-C reports whether coverage was affordable, and a Section 125 premium-only plan lowers the employee's actual out-of-pocket cost for that coverage by letting the employee pay their share pre-tax, which can help an offer clear the affordability safe harbor thresholds used on Line 16. The two forms of compliance work together: the health plan determines what coverage exists, the Section 125 plan determines how the employee pays for it, and Form 1095-C reports the result to the IRS. Employers weighing individual coverage arrangements alongside a group plan should also review our guide to <a href="/blog/how-does-ichra-work">how ICHRA works</a>, since ICHRA offers use a separate set of Line 14 codes.

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Sources: Internal Revenue Service (Form 1095-C instructions, Revenue Procedure 2024-40 penalty amounts, Revenue Procedure 2025-25 affordability percentage), Internal Revenue Code Sections 4980H, 6055, 6056, 6721, and 6722.