The Top 3 Things Employers Should be Doing NOW to Stay Compliant with the Affordable Care Act in 2020
Updated September 15, 2020
With the ACA not going anywhere in 2020, now is a good time to make sure your ducks are in a row for ACA compliance this year. Here’s some tips on how to stay compliant.
Quick reminder: Under the ACA employer mandate, ALEs (Applicable Large Employers) must periodically (usually monthly) offer at least 95% of their eligible full-time employees quality health insurance coverage, and fulfill all ACA reporting requirements around that, or risk paying penalties.
Minimum Value (MV): the plan must pay at least 60% of the costs of covered benefits
Affordable Coverage: A plan is considered affordable if the employee’s required contribution for the lowest cost self-only health insurance option offered by the employer in 2020 does not exceed 9.78%* of the employee’s household income. This applies even if the employee selects a different health insurance coverage option.
(*9.78% is for 2020. This percentage typically changes each year).
Here are 3 things you can do all year long (start NOW) to stay compliant and make 2020 reporting a breeze:
1) Make sure that you are allowing your ACA eligible employees to enroll into your employer-sponsored plan in a timely fashion.
2) Make sure the plan you offer to every eligible employee is affordable for that employee.
Stay compliant by using our 2020 Affordability Calculator to find out whether your health care plan is affordable for an employee using any of the three safe harbors.
3) Stay vigilant around IRS love letters.
Now that the ACA filing season has come to a close, we anticipate that the IRS will start their next round of sending penalty assessment 226J letters to employers. The hope is that you do not receive one of these letters. However, if you do, your first question will most likely be: “We complied with the ACA so why are they sending this to us”?
In most situations, we have found that the cause of the proposed assessed penalty falls in one of three areas:
Failing to mark the 1094-C as “Authoritative” when sending forms to the IRS.
Failing to indicate that minimum essential coverage (MEC) was offered in Part III column (a) on Form 1094-C.
Having 1 or more employees obtain a premium tax credit from an insurance exchange while employed by you, yet you offered compliant coverage to the employee, which they waived.
All of these situations are correctable in your response to the IRS. Thus, the best advice we can give you should you receive one of these letters: