Content updated March 12, 2019
When we first began talking with employers about Affordable Care Act compliance, the discussion always centered on ACA penalty risk management and who needs to care.
That was early 2012. In every case then, the employer introduced the topic.
- We came to think of our early clients as the Forced Minority – companies either offering coverage for the first time or expanding their existing offering to a wider employee base. This segment of U.S. employers first worried about identifying their employees eligible for health insurance – so they could get offers out pronto! – and later sorted through IRS reporting details of the coverage offers.
- Penalties are top-of-mind for the Forced Minority. They were aware that, by offering limited or no health insurance, they were vulnerable to significant financial consequences when the ACA employer mandate would get implemented.
- They knew they needed help in getting at their workforce data in new and exacting ways in order to avoid or minimize IRS non-compliance fines.
- They understood their information systems had to be rewired. And they appreciated that this process would not happen overnight.
Our current discussions with employers about ACA compliance still center on penalty risk management, but of a different kind. And now, we are often the ones introducing the topic.
Seldom are the talking points top-of-mind for the employer.
- We see many of our newer clients as the Burdened Majority – those employers who aren’t worried about who to cover because they already cover everybody. Their sole worry about ACA compliance is filling out IRS Forms 1095-C and 1094-C: the yearly statements for their employees and the IRS, and the most demanding workforce reporting yet.
- Employers in the Burdened Majority dismiss talk of penalties: “How can you be ACA non-compliant if you’re offering coverage that provides quality beyond what the law mandates?”
- Many of these employers are unaware that they need to get at their data for monthly breakdowns. Nor are they aware that, if they don’t file the new IRS returns, they will face a penalty of $540* per required form.
- Burdened Majority employers circle back to mentions of “year-end reporting.” They tell us they will prepare for Forms 1095-C and 1094-C production at the end of the calendar year.
Measuring the ACA Burdened Majority
According to an Employee Benefits report released in July 2017 by the U.S. Bureau of Labor Statistics, 70% of workers in the United States had access to health care benefits through their employer as of March 2017. When broken down by sector, this percentage varied. In the public sector, the percentage of access to health care coverage was 89%. In the private sector, access ranged from 51% at organizations that employ fewer than 50 workers to 89% at organizations that employ 500 or more workers.
Regardless of the variance, health care plans offered by most U.S. employers in this recent survey exceeded the minimums dictated by the Affordable Care Act. For this majority of employers, compliance with the coverage mandate of the new health law is a non-issue: They already are offering quality health insurance at minimal or no cost to their employees.
The ACA Compliance Disconnect
When we discuss ACA responsibilities with these employers, it is not uncommon for us to hear the belief that, because they offer quality coverage, they are immune to the legislation’s IRS requirements for information reporting.
- They understand that employers with 50 or more full-time employees, including full-time equivalents, must offer coverage of a certain standard to certain employees or face a penalty.
- But it is difficult for employers who take pride in both their conscientiousness and their generosity to come to terms with the fact that, in the ACA age, they must file the same IRS forms intended for assessment of penalties against employers who offer limited or no coverage.
Preparedness, then, for ACA reporting remains low among these employers – even though compliance with this federal law has been enforceable since January 1, 2015.
What exactly must the ACA Burdened Majority do
The burden facing these employers is that, in order to meet the IRS reporting requirements, they must comply with the tracking guidelines for how hours of service (not just paid hours of work on the job) must be broken down on a monthly basis.
All employees – exempt and non-exempt – must have their hours of service tracked. Factored into the hours of service calculation are such matters as jury duty, military duty and FMLA absences.
Employers must also track what coverage was offered and whether an employee accepted any coverage. The new IRS Form 1095-C must be provided to each eligible employee within the same timeframe as the traditional W-2. Accompanying this form for ACA reporting is IRS Form 1094-C, which provides a transmittal document that is sent to the IRS.
ACA penalty risk for the Burdened Majority
The two ACA penalties you most frequently hear about don’t apply to employers who offer quality health insurance to their entire workforce. If you are in the Burdened Majority, your concern is neither what is called the IRS sledgehammer (the ACA penalty for offering no coverage), nor the IRS tack hammer (the ACA penalty for offering coverage that does not meet value or affordability standards).
Your ACA risk is the IRS non-filing penalty – $540* per required return. This penalty is assessed for willful disregard of any information reporting requirements, including those for ACA returns. For late filing or erroneous filing, the penalty is $270* per required form.
How and when to prepare for ACA year-end reporting
By January 31, 2020, employees who are eligible for coverage from their employer, or who have coverage from their employer, must get their copy of Form 1095-C. By February 28, 2020, the employer’s copies of the 1095-C forms must be transmitted to the IRS with a respective 1094-C transmittal form. If you are electronically filing, 1094-Cs are due to the IRS by April 1, 2019.
Preparing now to generate these IRS forms is key.
The detailed record-keeping involved in producing Forms 1095-C and 1094-C is not a job for spreadsheets. Automation is needed to ensure accuracy. Waiting to deploy ACA tracking and reporting software carries its own measure of risk.
As more and more employers in the Burdened Majority wake up to the reality of compliance at year’s end, they may find compliance vendors inundated with servicing others.
Integrity Data can help with trusted, easy-to-use ACA software
With a team that has followed employer responsibilities for Affordable Care Act reporting since 2012, we can make this compliance burden a non-issue for you, too.
Our smart code base makes for deployment in a day—not weeks or months. And our attentive, clear-speaking implementation team shortens the learning curve.
To learn more about Integrity Data’s ACA tracking and reporting engine:
*subject to change each filing year