If you are a US employer with 50 or more full-time employees, you must (still) comply with the Affordable Care Act (ACA) and file forms 1095-C (the year-end summary of payroll data for each full-time employee) with the IRS every year along with a summary 1094-C. These forms go beyond quarterly data and require a year’s worth of payroll and benefits data broken down monthly.
So in order to stay compliant with 2021 ACA requirements and avoid costly penalties and fees, there are ongoing activities that all employers need to be doing all year long, rather than just at year-end. Below we walk through the tasks you should have on your ACA compliance checklist this year. And if you are a more visual person, be sure to check out our updated infographic!
For starters, you need to keep records of every employee’s hours of service. These are the hours that an employee is available to the employer in addition to paid hours on the job. Hours of service include:
Leave of absence
Each month you need to identify which employees are ACA-defined as “full-time” and thus eligible for health insurance. There are two methods of determining eligibility for coverage: the monthly measurement method and the lookback method.
The Monthly Measurement Method
With the monthly measurement method, the employer counts an employee’s hours of service for each month in a calendar year. For coverage purposes, this method requires an employer to treat an employee as full-time (eligible for coverage) as of any month for which the employee’s hours of service totals 130.
The Look-Back Measurement Method
With the look-back measurement method, the employer determines the status of an employee as full-time during a future period – referred to as the stability period – based on the employee’s hours of service, month after month, during a prior test period (referred to as the measurement period).
You also need to review the list of newly eligible employees you should offer health insurance to, according to company policy. Failure to do so will result in an employer receiving an Employer Shared Responsibility Payment (aka “Penalty”) notification letter.
Make sure to test that the health insurance offered meets ACA affordability standards by tracking each employee’s self-only cost of coverage. If you employ lower-wage workers, you especially have to pay attention to the affordability safe harbors. Fines for offering non-compliant coverage, also known as the ACA tack hammer penalty, will be assessed monthly.
In addition, keep records of every calculation and each determination.
At the end of the year, you must produce a 1095-C tax form for every full-time employee (and everyone covered, if you are self-insured) that shows whether they were offered health insurance and, if so, at what cost and what quality. This is where the monthly tracking records become very useful, since monthly breakdowns are required for the 1095-C.
It should be noted that this is a must-do for every ACA-affected employer, even if you provide generous coverage to employees at no cost or if you choose a “pay” strategy (meaning you accept the penalty for not offering health insurance or for offering non-compliant coverage).
Next, you need to file copies of the employee forms with the IRS using a 1094-C transmittal form. When filing these forms, pay special attention to the requirement for electronic filing when you have 250 or more 1095-C submissions. Also, pay attention to the filing rules for parent-subsidiary and brother-sister groups.
Where to Get Help for ACA Reporting Compliance
In addition to your ACA compliance checklist, stay on top of ACA reporting with the experienced guidance of Integrity Data ACA experts and solutions. Take a strategic approach with the 360-degree tracking system that automates ACA reporting – internally and for the IRS – and gives you year-round business intelligence. Integrity Data has been on the front lines of ACA tracking since 2012. Let’s talk about how we can help you.