Content Updated August 12, 2019
All the recent activity around ACA repeal/replace, and the Texas ruling, has created a lot of confusion for employers. The net outcome of this has been…nothing. The ACA – including the employer mandate – stands.
With 2019 in full swing, now is a good time to recap what the employer mandate is and who needs to abide by it. This is part 1 of a 2-part blog, covering who needs to comply, and what they need to do to be compliant and by when. Part 2 will dive into the associated penalties for non-compliance.
Who needs to be ACA Compliant?
All Applicable Large Employers (ALE) are subject to the employer mandate. An ALE is defined as a US employer with 50 or more full-time employees (or equivalents) in the previous tax year. Commonly controlled and affiliate companies are treated as one group for determining ALE status so they must combine their full-time employee counts.
Learn more by watching our video: Does Your Business have to comply with the ACA?
What do you need to do to be compliant? And when?
There are 2 levels of ACA compliance for employers:
1) Compliance with the Coverage Mandate
Employers must be timely in offering health insurance of certain quality to full time employees on a periodic basis (typically monthly) or risk penalties. So, employers must offer a “Qualified” Plan to their employees to avoid penalties. This means the plan must offer:
- Minimum Essential Coverage (MEC)
- Minimum Value (MV): the plan must pay at least 60% of the costs of benefits
- Affordable Coverage: A plan is considered affordable if the employee’s required contribution does not exceed 9.56% (this amount is adjusted annually based on the federal poverty line %)
To check whether a plan meets MEC and MV standards – which have their own intricacies – consult a knowledgeable insurance broker
2) Compliance with the IRS Reporting Requirements
Employers must prove the right offer was made to the right employee at the right time at year-end. They do this by providing the IRS with a form 1095-C for each full-time employee and then sending copies of these along with a 1094-C to the IRS. Employers must also report these offers to employees by sending a copy of the 1095-C to the employee directly.
- January 31 – Distribute 1095-Cs to employees
- February 28 – File 1094-C with copies of 1095-Cs to IRS (paper filing)
- March 31 – E-file 1094-C with copies of 1095-Cs to IRS (required to e-file if over 250 employees)
Our next blog will talk about what the penalties are if employers do NOT comply with the employer mandate and if the IRS really is going to pursue them – especially under the current administration.