Updated December 6, 2019
Repeal ACA, replace ACA, repair ACA or just leave it alone? While the lawmakers debate, employers are left with a lot of confusion. As of right now, the ACA, including the employer mandate, remains in place and all the compliance rules still apply.
Nearing year-end and your 2019 tax reporting, this would be a good time to run through the specifics of the employer mandate, how it works and who is bound by it.
This is part 1 of a 2-part article. Part 1 discusses the who, when and how of compliance. Once we’re all clear on compliance, Part 2 will discuss the penalties associated with failure to do so.
ACA Compliance: Who must comply
The ACA Employer Mandate applies to all Applicable Large Employers or ALEs. The act defines ALEs as US employers having 50 or more full-time employees (or equivalents) in the previous tax year. Companies that are affiliates or are commonly controlled are treated as one employer for the purpose of determining ALE status. That means that they must combine their numbers for the full-time employee total.
Learn more by watching our video: Does Your Business have to comply with the ACA?
ACA Compliance: What do you need to do to comply and when do you need to do it?
Employers face 2 levels of ACA compliance. They must comply with the ACA Coverage Mandate and they must comply with IRS Reporting Requirements.
1) Compliance with the Coverage Mandate
Under the ACA, employers must periodically (usually monthly) offer a certain quality health insurance to full-time employees or risk paying a penalty.
Qualifying plans 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 9.86% (this amount is adjusted annually based on the federal poverty line %)
Each of these requirements has its own intricacies, so it’s best to consult with a knowledgeable insurance broker before choosing a plan for your company. They will be able to tell you if the plan meets MEC and MV standards.
2) Compliance with IRS Reporting Requirements
At year end, the ACA requires employers to prove that they have made the right offer to the right employee at the right time. This is done 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 send copies of the 1095-C directly to each employee.
- March 2 (extended from January 31) – Distribute 1095-Cs to employees
- February 28 – Mail 1094-C to the IRS (paper filing, only if you are not e-filing)
- March 31 – E-file the 1094-C to the IRS (required if over 250 employees)
Learn more by watching our video: How do I comply with the ACA? and What is a 1095-C?
Part 2 of this topic will discuss the penalties that apply if employers fail to comply with the ACA Employer Mandate and whether the IRS is really going to follow through with those penalties.