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Get ACA Compliant! Your Guide to Staying on the Right Side of the Law

Both Large and Small Businesses Need to Follow Specific ACA Guidelines--Find out How Your Business Can Avoid Penalties for Noncompliance.

July 9th, 2018


Although some have speculated about what might happen to the Affordable Care Act in 2018, it’s still in effect, and employers still face penalties if they don’t comply.

In fact, companies that failed to comply in 2015, 2016, or 2017 may still have to pay penalties for those years, says HR Dive. These penalties are called Employer Shared Responsibility Payments. The IRS has fallen behind in issuing such penalties, which means non-complying employers could face a hefty cumulative fine.

“The IRS began to issue ACA penalty assessments in its Letter 226J penalty notice in November,” says The ACA Times. “Since then, the IRS has issued more than 30,000 of these notices containing penalty assessments of about $4.4 billion to employers for failing to comply with the employer mandate.” The IRS is still in the process of issuing penalties.

The due date was March 2, but compliance is a year-round activity.

Under the ACA, if you have 50 or more employees who work full-time, you need to provide your employees and their dependents with health insurance. Here’s how to make sure you’re complying with the guidelines.

Determine Whether You’re a Small or Large Business

Even if you think you know you’re a small (or large) business, double check. If you own more than one small business, for instance, you could be considered an applicable large employer (ALE), according to the IRS. That means you’re subject to the same ACA compliance rules as large companies. Conduct an aggregate employer analysis to find out if this describes you.

  • Determine your number of full-time employees for each month of the past year. A full-time employee averages at least 30 hours of work each week or 130 total work hours for the month, says the IRS.

  • For employees who work less than that, the IRS provides the following instructions for calculating your full-time equivalents for each month:

    • “Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee.”

    • “Divide the total by 120.”

  • Calculate your total number of full-time employees for that year. The IRS explains that to find the size of your workforce for a given year, you must add the total number of full-time employees for each month of that year to your total full-time equivalents for that year, and then divide the sum by 12.

If You’re a Small Business…

You don’t need to provide health insurance to your employees, but if you do choose to provide it, you need to follow certain guidelines, as follows.

Share Information about the Marketplace

Small businesses are required to share the following information with their employees.

  • Regardless of whether you actually offer insurance, you’re legally required to provide information about the Marketplace to your employees so they understand their options. Compile a packet of information educating them on the availability of health insurance through the Marketplace.

  • If you offer health insurance, give employees a “Summary of Benefits and Coverage” (SBC) form that shares what health services their plan covers and how much it costs, advises

Adhere to the 90-day Maximum Wait

If you offer coverage, you must make it available within 90 days of the employee’s start date. Moreover, you must offer the coverage to all eligible employees, says You can set the eligibility guidelines (as long as they are legally acceptable, of course), but after that, you must adhere to them. For example, you might offer coverage for all full-time employees.

Report What Health Care you Provide

Even though you’re not required to provide health care, you need to report how much you do provide (or whether you don’t provide it).

  • Fill out an information return and transmittal form and submit it to the IRS. This form is usually due by February 28 (or March 31, if you’re filing electronically), the IRS says.

  • This typically means filling out Forms 1094-B and 1095-B. Visit this page on the IRS’ website to learn more about how to file.

Read the IRS article “Overview of SHOP: Health insurance for small businesses” for more information on guidelines and options. Visit the IRS’ page “SHOP how-to guides, fact sheets, tools, and other resources for employers” as well.

Adhere to Rules on 'Flexible Spending Account' Maximums

Flexible spending accounts (FSAs) let employees avoid paying taxes on funds they’ll be using to cover healthcare costs. Employees may not contribute over $2,650 to their flexible spending accounts (FSAs) in 2018, although employers themselves can contribute above that amount, says If your employees have FSAs, ensure staff who handle payroll and benefits understand these requirements.

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Handle Medical Loss Rebates Appropriately

“Insurance companies must spend at least 80% of premium dollars on medical care,” says When insurance companies don’t meet that requirement, they’re expected to give out rebates to customers, which are typically businesses with a group plan. If that happens, you need to correctly distribute the funds within your employee group. Read the guidelines from the IRS on how to do this.

Claim a Tax Credit, if You’re Eligible

  • Claim the Small Business Health Care Tax Credit if you think you’re eligible for it. Read an overview of requirements from the IRS here.

  • A handful of U.S. states, such as Indiana, Massachusetts, and Mississippi, also offer tax credits to small businesses with wellness programs. Claim state credits if they’re offered where you live.

Watch for Changes on the Horizon

The current administration just released a rule saying that small businesses and self-employed workers can form associations in order to purchase health care collectively. Employers in the same field across a broad geographic region, or businesses in unrelated fields within a smaller region, can unite as an association.

Prior to the rule, small businesses didn’t have the opportunity to band together and form large associations as large companies. They had to demonstrate a much stronger “commonality of interest” in order to unite as associations, says The New York Times. “Existing rules limit association plans to groups of employers in the same industry in the same region,” says The Washington Post.

Access to these new options could begin on September 1.

The ability to purchase health insurance for employees as an association could lower employers’ costs of insurance, although consumer advocates fear it will bring some drawbacks, such as reducing the quality of the plans, says CNN.

“Unlike ACA plans, association coverage does not have to include benefits across the broad “essential” categories, including hospitalization and emergency care,” explains The Washington Post.

If You’re a Large Employer...

Providing insurance to your employees is mandatory, not optional. Here are some additional compliance guidelines that large employers must adhere to.

Meet Minimum Standards for Insurance

The insurance that applicable large employers provide must meet the following minimum standards, the Treasury Inspector General for Tax Administration (TIGTA) stipulates:

  • Coverage requirements: The plan must cover a standard range of services, including preventative and wellness care, emergency care, prescription drugs, hospitalization, and doctor visits.

  • Value: The plan needs to cover at least 60% of the total cost of care incurred.

  • Affordability: The amount of the self-only premium paid by the employee cannot be more than 9.5% of his or her annual household income. (This amount has changed over the past several years, so check the current requirements on the IRS website each year.)

Follow Reporting Requirements

  • Give your employees Form 1095-C in January.

  • File Form 1095-C (the employee statement) with the IRS on time. In 2018, it was due on February 28 (for mailed forms) or April 2 (for electronic filing).

  • If you’re filing 250 or more returns, you must file them electronically, says the IRS.

Read the IRS’ detailed guidelines for filing these forms to make sure you’re fully compliant with them.

Review your ACA Compliance

  • Conduct an audit of your ACA compliance since 2015. First Capitol Consulting offers a free review of your 1094-C and 1095-C forms to assess your level of ACA compliance. You’ll be able to mitigate any issues before the IRS gets in touch, and to avoid any penalties in the future.

  • If you’re a large employer (50 or more full-time employees), visit the Taxpayer Advocate Service website to use a tool that will help you estimate how much you might owe in Employer Shared Responsibility Provisions. (The Taxpayer Advocate Service is a part of the IRS, but it will not report your results to the IRS.) That way, if you face any penalties, you can work to mitigate the damage.

Appoint a subject matter expert who can keep your company up to date on regulations and best practices. Then appoint someone to head your in-house compliance audit (they can be the same person).

Regardless of minimum standards for health insurance, keep in mind that today’s employees and job candidates typically want to see a well-rounded benefits package. Compliance is only part of the picture--making your company an attractive place to work means going the extra mile to keep employees satisfied. Wellness incentives are a great way to keep your workforce healthy and productive--and they might even earn you a tax credit!

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