Beginning in 2015, employers must offer health coverage to full-time employees or potentially pay a penalty. The mandate requires compliance (offering health coverage) and reporting (providing data about that coverage to the government).
See how we can help
ACA Compliance Webinars
What is the Affordable Care Act Employer Mandate?
What is involved in reporting?
Reporting demands detailed employee data that must be meticulously reconciled, recorded and analyzed, then provided to both employees (via Form 1095-C) and the IRS (via Form 1094-C). Risk of error is heightened because the process is so intricate. Employers should take steps to reduce risk of audit, and ensure that any data provided is “audit-ready.”
In addition to the type of coverage offered, if any, Forms 1094-C and 1095-C also explain any reason an employer did not offer coverage using over 50 code combinations to identify a particular employee’s situation in a particular month, for each month of the year. Failure to accurately, completely, and timely furnish Forms 1095-C and 1094-C can result in a penalty of $250 per form.
What type of health coverage must employers offer under ACA?
Plans must meet minimum essential coverage, minimum value, and affordability requirements.
What qualifies as minimum essential coverage?
Minimum essential coverage (MEC) is required of all individuals under the ACA’s individual mandate. Most employer-sponsored plans will fall into this category, although some ERISA plans and special coverage plans (like stand-alone vision or dental) won’t meet these requirements.
How are minimum value plans defined?
Coverage must also provide minimum value, as defined under 26 USC § 36B(c)(2)(C)(ii). This is currently defined as covering at least 60% of the total allowed cost of benefits incurred under the plan.
What are the guidelines for affordability?
Health coverage must be affordable for the employee, which means that the self-only premium for the lowest cost plan providing minimum value cannot exceed 9.5% of the employee’s household income. Most employers don’t know an individual employees household income, so there are three “safe harbors” you can use to determine affordability: W-2 wages, rate of pay, and federal poverty level.
What types of companies are impacted by ACA?
Companies operating in the United States with at least 50 full-time (or full-time equivalent) employees are subject to the ACA employer mandate. These companies are known as Applicable Large Employers (ALEs). Special circumstances also apply to companies that are part of affiliate or control groups, even if the member company has fewer than 50 full-time employees.
How are affiliate groups impacted?
Companies that are part of a complex ownership structure, may be responsible for more reporting than expected. Companies with controlled group or affiliate status are at significant risk of penalties because the analysis and reporting is so complex.
What are the obligations for organizations that have acquired or are considering acquiring another company?
As the new owner, the parent organization is responsible for any acquisitions’ ACA compliance. ACA complexity is multiplied for acquisitions, and requires detailed research of the target’s benefits plans and processes. For example, employers must ensure the correct application of measurement periods to identify eligible employees, account for complex transition rules for acquired employees, and much more. Plus, the acquiring organization is responsible for penalties that may not yet be assessed. Rigorous data analysis for acquisitions is needed to validate and create accurate reporting for ACA compliance.
Is the IRS likely to audit ACA compliance?
Based on Congressional Budget Office projections, the IRS will be aggressively auditing ACA Employer Mandate compliance to the tune of $9 billion in penalty revenue in 2016. Payments from employers are expected to increase to over $20 billion by 2023. The more detailed and carefully managed your compliance, reporting, and documentation are, the better your chances for avoiding audit.