I made an image on illustrator with multiple layers, I selected release layers to sequence. I have tried doing this both with the layers grouped and un-grouped. I am saving this as an .ai (adobe illustrator file).
When I take this into After Effects I am importing file, and selecting composition retain layer sizes. I have it set to enable all acceptable files and I have tried importing it both with the illustrator/pdf/eps sequence checked on, and not checked.
As far as tutorials/help online says I am doing all these steps properly and have tried everything I can think of.
I'm not sure what to do from here to get my layers separated in After Effects. As it is right now I can import the .ai file but it it is imported as one layer instead of multiple layers.
A lot of the time, Illustrator artists don't actually use layers -- their documents are all in one big layer. Sure, there are lots of things in that layer, but there's still only one layer. I'd double-check that you actually made layer; it sounds as if you may not have.
To Dave's point: If you have a bunch of objects on a single layer in Illustrator, you can use the Release To Layers command in Illustrator to fix that.