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ACA compliance is the process of an Applicable Large Employer (ALE) offering health insurance coverage to eligible employees in accordance with the Affordable Care Act. ALEs are employers with 50 or more full-time employees working at least 30 hours per week or their equivalents when adding together part-time hours.
ALEs are required to offer health insurance coverage that meets the ACA’s specifications to at least 95% of full-time employees or pay the penalty. Businesses with fewer than 50 employees are exempt from the employer mandate. However, if they choose to offer health insurance coverage to their full-time employees, it must meet the ACA’s specifications.
The ACA’s specifications for health insurance coverage require that a plan must offer minimum essential coverage (MEC). Examples of plans that count as qualifying health coverage include:
A health insurance plan must also provide minimum value, meaning the plan pays for at least 60% of covered benefits.
ALEs must report on the health insurance coverage they have offered each calendar year under the employer information reporting provision. This process consists of employers using Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. Use these forms to report the following required information:
Applicable large employers must follow these guidelines as required by the Affordable Care Act to ensure they are ACA compliant.
Employers do need to report COBRA coverage for ACA compliance, depending on the situation. An employer does not need to report an offer of COBRA continuation coverage to a former employee due to termination of employment in Part II of Form 1095-C.
An employer does need to report an offer of COBRA continuation coverage to an active employee who loses eligibility for non-COBRA coverage due to a reduction in hours in Part II of Form 1095-C. An example of a loss of eligibility for non-COBRA coverage would be a change from full-time to part-time status resulting in a loss of eligibility under the health plan.
Let’s say an employer sponsors a self-insured health plan, and an employee’s spouse and dependents have separately elected to receive COBRA continuation coverage. In this case, the employer may choose to report coverage of each non-employee spouse and dependent who separately elects COBRA continuation coverage on Form 1095-B or Form 1095-C.
An example of this would be if an employee divorced their spouse and the spouse separately elected to receive COBRA continuation coverage. The employer would report the employee’s enrollment in Part III of Form 1095-C and the months of the calendar year that the spouse had coverage.
A full-time employee who terminates employment during a calendar year and receives an offer of post-employment coverage is not reported as an offer of coverage in Part II of Form 1095-C. An example of this situation would be an employee retirement.
For more information on what codes to use, see the IRS’ Reporting Offers of COBRA Continuation Coverage and Post-Employment Coverage.
If your company is considered an Applicable Large Employer with 50 or more full-time equivalent employees, you need to worry about ACA compliance. Failure to offer a health insurance plan that provides minimum essential coverage (MEC) and minimum value will result in penalties assessed. These penalties include:
$2,700 per full-time employee minus the first 30 for failure to offer minimum essential coverage to at least 95% of full-time employees.
$4,600 divided by 12 for each full-time employee receiving subsidized coverage through an exchange for the month for failure to provide coverage that is unaffordable or does not provide minimum value.
There are also penalties associated with information reporting of ACA coverage:
These penalties can quickly add up. Therefore, it’s critical for companies that are subject to the employer mandate to have a plan in place that ensures continued compliance with the Affordable Care Act. Using compliance software will automate these tasks and make Affordable Care Act compliance easier to manage.
Understanding the Affordable Care Act (ACA) guidelines and how they affect your business is a daunting task. It takes a considerable amount of time to determine a company strategy, gather the information you need to manage ACA requirements, and report health plan data to the IRS.
If you are looking to execute your ACA strategy with confidence and ensure you have a historical record of data for reporting or potential audits, APS can help. Our Affordable Care Act compliance software helps accurately manage ACA requirements of the Employer Shared Responsibility Mandate in the following eight ways:
1. Aggregate Cost of Health Insurance Reporting: With APS, you can easily track the employer’s amount of health insurance plans. When W-2s are processed, the employee and employer amounts are automatically combined and added to Box 12 Code DD.
2. Applicable Large Employer Calculation (FTE): Employers can use our ACA FTE report to calculate the number of full-time equivalent employees and determine company ALE status.
3. Notice to Employees of Coverage Options: Employers covered by the Fair Labor Standards Act (FLSA) must provide notice of the state’s Health Insurance Marketplaces to new employees within 14 days of their hire date. Department of Labor model notice templates are available in the APS Help Center to make this process easier.
4. Part-Time Staff Management: APS offers an ACA Weekly Threshold alert, which provides a dashboard notification to view employees approaching and those who have exceeded the 30-hour threshold. The alert is available in our ACA compliance software and manager self-service portal.
5. Benefits Administration: APS Benefits Administration is a comprehensive solution that manages and documents ACA compliance, providing a solid foundation to meet IRS reporting requirements. Whether your company uses online or paper-based benefits enrollment, Benefits Administration gives you the ability to manage this information in a centralized database.
6. Average Hours Compensated Per Week Reporting: The Average Hours Compensated Per Week report makes it easy to view hours compensated during measurement periods to determine which employees are eligible for health coverage.
7. ACA Dashboard for Measurement Periods and ACA Alerts: The ACA Dashboard helps organizations determine which variable hour employees worked enough hours to qualify for health coverage during the designated measurement period. The ACA Dashboard works with our Core HR software and Health Benefits Administration solution for seamless, efficient compliance management.
8. Health Plan Coverage Reporting: APS handles the reporting requirements under Section 6056 of the ACA by populating Forms 1094-C and 1095-C with the required information. You can accurately capture and report this information using the Benefits Administration and ACA reporting features in the APS platform.