Ensuring compliance with the Affordable Care Act (ACA) is a critical responsibility for employers. Non-compliance can lead to costly penalties, making it essential for organizations to understand the tracking and reporting requirements under the law. This guide covers what employers need to know to stay on top of their ACA obligations.
Why ACA tracking is crucial for compliance and avoiding penalties
The ACA mandates specific requirements for employers, particularly those classified as Applicable Large Employers (ALEs). Maintaining precise records of employee work hours, benefit plans, and eligibility criteria forms the foundation of ACA compliance, enabling employers to effectively meet regulatory demands:
- Avoid penalties for failing to provide adequate health coverage.
- Ensure accurate reporting to the IRS.
- Meet employee expectations for benefit offerings.
Overview of the ACA
The ACA was enacted to expand access to affordable health insurance and reduce the number of uninsured individuals in the U.S. For employers, it introduced new obligations, including providing affordable health coverage to eligible employees and reporting on coverage offerings to the IRS. These requirements have had a significant impact on how businesses manage their workforce and benefits programs.
Requirements for applicable large employers (ALEs)
Under the ACA, ALEs — those with 50 or more full-time-equivalent employees — must:
- Provide affordable Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and their dependents.
- Ensure that the employee’s share of premiums for the lowest-cost self-only coverage does not exceed a certain percentage of their household income.
Failing to meet these requirements can result in substantial penalties, making accurate tracking and timely reporting essential.
Key ACA tracking requirements
To remain compliant, employers must monitor several key areas:
- Total employee headcount:
- Determine whether your organization qualifies as an ALE by calculating your full-time-equivalent employees.
- Classifying full-time and part-time employees:
- Identify which employees are considered full-time under the ACA (those working an average of 30 or more hours per week).
- Monitoring hours and schedules (look-back method):
- Apply the look-back measurement strategy to assess whether variable-hour employees qualify as full-time based on their average hours worked.
- Tracking employee benefits coverage and contributions:
- Ensure accurate records of which employees are offered coverage and the affordability of the coverage provided.
Reporting obligations
The ACA requires ALEs to file annual reports with the IRS, including Forms 1094-C and 1095-C. These forms serve as proof that the employer has complied with ACA regulations:
- Form 1094-C:
- Acts as a transmittal form summarizing the data reported on Forms 1095-C.
- Form 1095-C:
- Provides detailed information about the health coverage offered to each full-time employee.
Failing to file these forms accurately and on time can result in significant penalties.
Challenges in compliance
Complying with ACA regulations can be challenging due to:
- Tracking hours and determining eligibility:
- Ensuring accurate classification of employees based on hours worked.
- Keeping up with changing ACA rules:
- Stay informed about updates to ACA regulations and thresholds.
- Risks of errors or delays in reporting:
- Avoiding mistakes in filing forms or missing reporting deadlines, which can trigger penalties.
Outsourcing for simplification
Managing ACA compliance in-house can be complex and time-consuming. Many employers turn to third-party administrators (TPAs) for support. TPAs offer expertise and resources to simplify the compliance process:
- Ensuring accuracy:
- TPAs use specialized tools and processes to minimize errors in tracking and reporting.
- Reducing the workload with streamlined processes:
- By handling administrative tasks, TPAs free up internal teams to focus on other priorities.
Conclusion
Proactive tracking and compliance are essential for avoiding penalties and maintaining smooth operations. Leveraging technology and expert support can significantly ease the burden on employers, ensuring accurate tracking, timely reporting, and adherence to ACA requirements. By staying ahead of compliance challenges, employers can focus on their core business while meeting their obligations under the law.
The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter. The reader should not act or refrain from acting on the basis of any content included in this article without seeking tax, legal, or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address the reader’s situation. ebm disclaims all liability for actions the reader takes or fails to take based on any content within this article.
