As the dust has finally settled from the 2015 filing season, the next question should be “Is our company IRS-compliant for the Affordable Care Act’s 2016 filing season?” To truly answer this question, several other items must be evaluated and addressed.
First, to start the compliance process a company needs to determine if they are an Applicable Large Employer (ALE). This is a company that has 50 or more full time and equivalents. To verify and understand the definitions, watch the first video on our ACA Education page “Does your business need to comply with the Affordable Care Act? Are you an ALE?“
The next determination is based on if your company offers affordable coverage or not. For 2016 the definition of affordable coverage is based on 9.66% of an employees modified adjusted gross income as reported to the IRS on their personal tax returns. This isn’t necessarily information that an employer would have. Through the use of one of the 3 safe harbor options an employer can determine if coverage is affordable or not for their employees. These safe harbors offer maximums that an employer can charge for the least cost plan. For example if W-2 safe harbor is used, an employee’s W-2 box 1 wages are $100,000 the employer can require the employee to contribute up to $9,660 for the least cost plan offered. Once a safe harbor is determined an employer can analyze if its coverage is affordable or not.
The final question should be “Is coverage being offered to at least 95% of full time and equivalent employees?” This question at face value seems like a rather easy question to answer. However, to answer this a significant amount of data is needed to determine if someone should be offered coverage or not. This is based on hours worked in the different measurement periods. This is where an ACA solution is truly invaluable. Using a solution like Integrity Data’s ACA Compliance software analyses and evaluates this data. From this, the solution can determine who should be offered coverage and when they should be offered coverage.
Using these quick references will help your company determine if they are compliant or not. This is not by any means a comprehensive list of what is required to be 100% compliance. This is simply a quick reference to raise any red flags if need be. Even though ACA seems complicated, at its root it is a matter of the type of coverage offered (based on value and affordability) and if coverage was offered to the correct people. Using this guide will help point your company in the right direction to maintain compliance for 2016.