February 1, 2024

Understanding ACA Compliance

Understanding the complexities of the Affordable Care Act (ACA) compliance can be tricky. This guide navigates through the elements of ACA compliance, including who needs to comply, what the requirements are, and how businesses can effectively manage their obligations. From determining employee eligibility to handling IRS penalty notices, this breakdown offers valuable insights into ensuring your business stays aligned with ACA mandates.

If a business is subject to the ACA, they are required to make affordable health insurance available, ensuring it meets the minimum essential coverage and value criteria for at least 95% of their full-time workforce (dependents included). They must also convey critical information to employees, such as:

– Details of the coverage and benefits available

– Summary of Benefits and Coverage (detailing available plans and employee contribution)

– Form 1095-C, Employer-Provided Health Insurance Offer and Coverage (yearly validation of provided benefits)

The necessary forms (1094-C/1095-C) must be submitted to both the IRS and relevant state agencies annually to verify that full-time employees had access to timely, cost-effective, and ACA-adherent coverage throughout each month. Filing these forms accurately is crucial to avoid penalties from both the IRS and state authorities.

Eligibility for ACA Compliance

The ACA targets applicable large employers (ALEs), defined as organizations with 50 or more full-time or equivalent employees during the last calendar year. It’s recommended to evaluate all employees’ status within a company since traditional HR classifications might not align with ACA eligibility criteria.

Organizations under multiple federal employer identification numbers (FEINs) are viewed as interconnected entities rather than separate ones. Employers seeking further clarity should consult the IRS guideline: Determining if an Employer is an Applicable Large Employer.

What are the challenges to meeting ACA compliance?

Per industry observations, there are four primary hurdles in adhering to ACA regulations: establishing employee eligibility, confirming plan affordability, executing accurate reporting, and addressing penalty notices.

Establishing Employee Eligibility

To avoid penalties, ALEs must insure at least 95% of their full-time staff and their dependents. ACA defines a full-time employee as anyone working at least 30 hours per week or 130 hours in a month.

It’s essential for employers to constantly monitor employees who meet these criteria and whether they opt into offered health plans. Effective tracking entails a comprehensive understanding of not just the hours counted by the ACA but also other factors like leaves of absence.

Confirming Plan Affordability

ACA stipulates that employer-sponsored health plans must not exceed a specific portion of an employee’s household income while ensuring a minimum level of benefits.

Given the lack of visibility into an employee’s household income, employers might resort to safe harbor calculations like W-2 wages and rate of pay to assess affordability. These calculations can also factor in wellness programs and incentives that could influence healthcare costs under ACA guidelines.

Reporting Requirements: Staying on Top with the IRS and States

Employers must file Form 1095-C with the IRS and distribute copies to all eligible employees. This form records details on health coverage type, lowest available premium, coverage timeline, and enrollment periods for employees and their dependents.

Additionally, Form 1094-C, serving as a summary document for employer-level data, is submitted solely to the IRS. Besides federal requirements, some states have established identical reporting demands. Compliance methods, including reporting formats and deadlines, may differ state by state.

Addressing Penalty Notices from the IRS

Penalty notices derive from filings (Forms 1094-C/1095-C) or the absence thereof, alongside data from other sources (W-2 forms, federal affordability standards). In cases of inaccuracies or delays, companies have a limited timeframe to present coherent responses or corrections to avoid penalties.

Roles of Dedicated ACA Compliance Experts

A thorough compliance plan involves preparation to anticipate both foreseeable and unforeseeable challenges effectively. Responsibilities typically include:

– Gathering essential data for ACA reports like health plan affordability and coverage offers.

– Aligning recruitment policies with compliance needs while properly classifying employees.

– Ensuring timely provision of minimum essential health coverage with sufficient value starting from hiring until no later than the first day of the fourth month.

– Continuously reviewing employee roles to identify if those on seasonal or varied schedules qualify for health benefits promptly.

– Investigating and replying to any IRS penalty notices before set deadlines to mitigate or clear penalties.

Common Compliance FAQs

When was the ACA passed?

The Affordable Care Act (ACA), was enacted on March 23, 2010.

What are Employer Obligations under the ACA?

ALEs need to ensure a minimum essential coverage that’s both affordable and meets value requirements for over 95% of their full-time staff (dependents included), monitoring coverage per FEIN per employee monthly. Failing to meet these criteria could lead to employer shared responsibility payments (ESRP).

What is an ACA Penalty Notice?

ALEs face penalty notices if their Form 1095-C/Form 1094-C reporting is incorrect or delayed. ESRP notices highlight failures in providing suitable benefits timely, listing affected employees, potential penalties under IRS Code Section 4980H(a), (b), or both, along with fines for each discrepancy.

The landscape of health care regulation is subject to change, and staying compliant with the ACA requires ongoing attention to legislative updates and a deep dive into specific regulatory details that are best navigated with professional assistance. Tesseon aims to equip you with initial guidance while recommending consultation with expertise tailored to your organizational needs for a comprehensive approach towards ACA compliance.

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Disclaimer: The information provided on this blog page is for general informational purposes only and should not be considered as legal advice. It is advisable to seek professional legal counsel before taking any action based on the content of this page. We do not guarantee the accuracy or completeness of the information provided, and we will not be liable for any losses or damages arising from its use. Any reliance on the information provided is solely at your own risk. Consult a qualified attorney for personalized legal advice.

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