The Supreme Court recently dismissed a challenge to the Affordable Care Act (ACA) brought by several states, concluding that the states don’t have the standing to challenge it.
What does this mean for your business? For now, it means continuing adherence to the relevant payroll and benefits policies, procedures and reports.
What is the Affordable Care Act (ACA)?
The Affordable Care Act (ACA) was passed in March of 2010, and is dedicated to making affordable health insurance available to more people by expanding Medicaid eligibility, implementing a health insurance marketplace, providing guidelines for insurance coverage, and preventing insurers from denying applicants with pre-existing conditions.
The act directly impacts the availability, affordability and quality of health insurance coverage in the United States.
Is My Business Covered by the ACA?
Most businesses aren’t. In fact, more than 95% of all businesses aren’t.
The law mainly applies to companies with 50 or more full-time or full-time equivalent (FTE) employees. To calculate the number of FTEs, take the number of hours worked by employees who work less than 30 hours per week and divide by 120. This will give you the number of FTEs who count toward the full-time employee number in IRS reporting and documentation.
Want to make the process a little easier? Here’s a full-time equivalent (FTE) employee calculator.
For the 5% of businesses that are covered by the ACA, you do have a responsibility to provide health coverage to employees. You will need to address the requirements of the act. Small businesses that aren’t covered under employer mandate may still choose to offer their employees insurance. In that case, there are fewer obligations than if your business was covered under the ACA, but there are obligations that will need to be addressed.
Be sure to check your health care coverage options and your responsibility to the IRS.
ACA Compliance
When you are covered under the ACA or choose to offer insurance, there are two basic requirements that must be met.
Your business will need to:
- Offer Affordable Coverage: Your business must offer coverage that doesn’t exceed 9.83% of an employee’s household income (as of 2021). It can be difficult for employers to know the household income of their employees. You can use three safe harbors to determine the affordability calculation for the business.
- Offer Minimum Health Care Value: The health plan offered to employees must cover at least 60% of services. This include deductibles and copays.
The Importance of ACA Compliance
You will incur penalties if you fail to offer qualifying health insurance to employees.
For 2021, a penalty of $2,700 is applied for every full-time employee (minus 30) if the employer doesn’t offer minimum coverage to at least 95% of the employees and their dependents. For example, for a company with 100 employees, the penalty would be: 70 (100 employees minus 30) x $2,700 = $189,000.
Other requirements for ACA compliance include:
- Businesses must allow for a 90-day waiting period to offer employee health insurance. This must be within the same timeframe after the date of hire.
- Employers must provide a “Summary of Benefits and Coverage” to each employee.
Steps to Ensuring ACA Compliance
With reporting and processes in place, compliance doesn’t have to be difficult. Many organizations use technologies or managed services in place to supplement internal resources and to ensure compliance. Various automations and APIs to your current HR solutions will help gather the information needed for IRS compliance. Your payroll and benefits department will need to track the following:
- FMLA absence
- Holiday
- Illness
- Incapacity
- Jury duty
- Layoff
- Leave of absence
- Military deployment
- Vacation
You’ll need a year’s worth of data with monthly breakdowns to fulfill IRS reporting requirements.
Required ACA Forms
Alongside compliance, there is necessary paperwork for ensuring compliance.
The IRS requires the forms 1095-C and 1094-C to be filed every year. Small businesses that provide sponsored self-insured health coverage will need to file the 1094-B and 1095-B forms. These forms must be filed manually.
For many businesses, the required paperwork requirements can be time-consuming and costly. The 1094-C takes an estimated four hours to complete. The 1095-C takes an estimated 12 minutes to complete. With 50 employees, it can take as much as 13 hours to complete all forms needed.
We haven’t even accounted for the time it takes to process the forms. Many companies struggle to account for these hidden costs for compliance.
Getting Help: ACA Forms, Envelopes and Filing Processes
There are enough headaches that come with managing payroll and benefits, especially for large organizations.
Processing the ACA-required forms in-house can be expensive. It takes employee time away from more important or more profitable work. This may be even more costly if employees are focused on other business initiatives.
GO2 Partners can help you meet your compliance requirements, take pressure off overworked employees, and significantly reduce hidden costs with our GO2TaxSolutions Print, Mail and E-file service. For additional information, please contact us at 800-545-0792 or inquiries@ourpartners.com.
