Affordable Care Act Employer Mandate Enforcement is No Joke

Updated 10/23/2023

For many US employers, reporting year 2015 was an introduction to the realities of complying with the new ACA employer mandate. Initially meant to be implemented in 2014, this employer mandate was partially enforced in 2015 but is now fully implemented and enforced. This makes reporting even more crucial to a company’s ACA compliance and financial responsibility.

So, what do you need to know as far as the ACA employer mandate goes?

1. Affordability Requirements: In 2015, a plan was considered affordable if it cost no more than 9.5% of the employee’s household income. In 2023, this threshold is now 9.12% of the employee’s household income. Click here to read more about how to use affordability safe harbors
2. Penalties:
   1.  MEC Penalty (aka the sledgehammer penalty): When minimum essential coverage is not offered, penalties will be accrued. Requirements are considered unmet if the following occurs:
      1. A premium tax credit is received from the marketplace AND a qualified health plan is purchased by at least one full-time employee
      2. Minimum essential requirements are not met by the plan
         This penalty is adjusted annually for inflation. In 2023, the penalty has been raised to $2,880 x number of FTEs in excess of 30 employees.
   2. Inadequate Healthcare Penalties (aka the tack hammer penalty): These penalties for non-compliant coverage will apply if a qualified employee receives a tax credit to purchase insurance in the marketplace for one of these reasons:
      1. The standards for minimum value were not met
      2. Coverage offered by the employer was deemed unaffordable
      3. The employee was not part of the 95% of employees offered coverage
         According to the IRS, “On an annual basis, this payment is equal to $3,000 (adjusted annually for inflation, so for 2023 this amount is $4,320) but only for each full-time employee who receives the premium tax credit. The total payment in this instance cannot exceed the amount the employer would have owed had the employer not offered minimum essential coverage to at least 95 percent of its full-time employees (and their dependents).”
   3. Reporting requirement penalties are also higher:
      1. Information Returns: The penalty for failure to file a correct information return is $280 for each return for which the failure occurs.
      2. Payee Statements: The penalty for failure to provide a correct payee statement is $290 for each statement for which the failure occurs.
      3. If there is intentional disregard for filing correct payee statements, special rules apply which increase both the individual penalty and calendar year totals.
         If a company fails to file an information return and a payee statement, the fines are a combined $580 per return. See the publication from the IRS here.

The time has come for companies to pay close attention to their ACA compliance. As long as the updated requirements are understood and followed, there is no reason to worry.  Partner with a trusted, proven ACA Compliance software partner for even less reporting stress!