Tips for ACA Compliance Management
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. This post was sourced from shrm.org, and we hope you find it useful.
Are you new to managing your company’s ACA compliance? Or, is your company approaching 50 full-time or full-time equivalent employees for the first time?
Our ACA software and services can help you streamline compliance and help prevent penalties throughout the year.
Here are some tips to help you successfully manage compliance if you have been tasked with the complexities of tracking and filing ACA-related data.
If you are manually tracking, our comprehensive IRS-certified ACA software can help ease the burden of compliance, and we are IRS-approved to optionally file on your behalf.
Our Full Service option is the easiest. If you want to turn the entire process over to us – just provide a spreadsheet with employee data, and we do the rest.
Are you an ALE?
Confirm that your company is in fact required to file.
Simply add the number of full-time staff and full-time equivalents, referred to as FTEs, to determine if your company meets the cutoff of 50 or more full-time or full-time equivalent employees.
Full-time employees are those who work more than 30 hours per week.
Your FTE count is calculated by adding up the number of hours worked during the month by your employees who are not full time and dividing that number by 120. The result is your number of FTE employees.
Add the number of full-time staff to the FTE total to see whether your company falls into the ACA requirement of 50 or more full-time or full-time equivalents, or not.
A company that needs to comply with the ACA is referred to as an ALE, an Applicable Large Employer. ACA Compliance and reporting begin the first year after the FTE threshold is met.
You can track ACA-related employee data manually, but comprehensive ACA software or an ACA reporting service can help you streamline compliance.
Review Your Group Health Plan
Once you have confirmed that your company is indeed required to comply with ACA regulations, a review of your existing Group Health Plan is a smart next step.
Does your existing plan fall into “grandfathered” status? A grandfathered plan is one that has covered at least one person continuously since March 23, 2010. There are certain exceptions, for instance, if substantial changes have been made to the coverage or costs. But this is an important step because plans that fall into “grandfathered” status do not have to comply with certain ACA rules.
Insurance Coverage Costs
Next, consider whether it makes better sense for your company to offer affordable insurance to your employees, or to estimate and prepare for IRS penalty expenses.
Insurance coverage costs are a burden to employers. There is the price of the coverage itself. In addition, there are the less obvious costs associated with tracking and managing it. The upside is that generous coverage is a benefit valued by employees. Good insurance helps employers attract and keep well-qualified staff, so it can be a win-win situation.
Weighing the cost of offering quality, affordable insurance against the potentially substantial penalties the IRS will levy is a decision each employer needs to consider carefully. Either choice carries costs and risks.
When you are working out the anticipated employer contribution costs, remember to only include contributions for the number of employees that you expect may actually enroll. In particular, industries with younger and healthier employees experience very low enrollment and offers result in no actual cost to you.
Passport Software’s ACA Software alerts when an offer of coverage will be needed and can help you streamline ACA data management throughout the year.
If your company has decided to offer insurance, it will be important to confirm that the employees’ share of the employee-only cost adheres to the ACA guidelines for affordability and meets the requirements for minimum coverage.
Employers generally don’t know their employees’ household incomes, so there are three affordability safe harbors, or criteria that ALEs can use to determine if the annual affordability standard is being met by their insurance offering.
The safe harbors are based on information the employer will have access to and any of the three criteria can be used:
· The employee’s W-2 wages, as reported in Box 1.
· The employee’s rate of pay. For 2022 reporting, this would be 9.61% of the employee’s hourly wage rate multiplied by 130 hours per month.
· The individual federal poverty level (FPL), as published by the U.S. Department of Health and Human Services (HHS) each January. Using the FPL safe harbor simplifies ACA reporting and coding of Form 1095-C, (which plan sponsors file with the IRS for each employee who is offered ACA-compliant health coverage), but this safe harbor method generally requires the largest employer contribution as well.
Review of Coverage Guidelines
Once you have confirmed the affordability of your company’s insurance offering, a review of the coverage guidelines is next. Essential health coverage under the health care reform law includes the following items:
· Ambulatory patient services.
· Emergency services.
· Maternity and newborn care.
· Mental health and substance use disorder services, including behavioral health treatment.
· Prescription drugs.
· Rehabilitative and habilitative services and devices.
· Laboratory services.
· Preventive and wellness services and chronic-disease management.
· Pediatric services, including oral and vision care.
Having settled these previous topics, there are 2 last points to address. First, the determination of who in your company must be offered coverage and, second, the reporting required to show the steps your company took to comply with the ACA.
Offers of Coverage
Employees who routinely work over 30 hours a week must be offered affordable coverage that meets at least the minimum coverage. Coverage for their dependents must also be offered. Spouses do not have to be included. Note also that spouse/dependent coverage does not need to meet any affordability standards.
A little more attention is required for the employees whose hours vary or a newly hired employee whose hours have not been fully determined.
Comprehensive ACA software that tracks eligibility and when offers of coverage are needed, as well as affordability, can help ease the burden of compliance.
Our ACA software helps ensure that coverage falls within the affordable range based on IRS criteria. And, our IRS-approved ACA software helps streamline tracking and filing to help reduce the risk of errors which may result in penalties.
There are three different ways to calculate whether employees whose hours vary or are not finalized should receive an offer or not. These methods are a best-effort attempt to document and anticipate hours worked to be able to decide if and when an employee should receive an offer of coverage. In some cases, these calculations will need to be made annually. In others, it’s a one-time calculation.
1. ACA Reports
Internal reporting to employees includes:
· Information about health coverage or lack of it.
· Information about the insurance marketplace often referred to as the exchanges, as well as how to use it.
· A summary of benefits and coverage to allow employees and their family members to compare plans.
· Grandfathered status. To maintain status as a grandfathered health plan, a plan must include a statement in any plan materials provided to a participant or beneficiary describing the benefits provided under the plan or health insurance coverage and indicating that the plan believes it is a grandfathered health plan within the meaning of section 1251 of the ACA. It must also provide contact information for questions and complaints.
2. Federal reporting includes:
· W2 reporting – There is a requirement that W-2 forms should include the cost of coverage for employees. Although such reporting is optional for employers that file fewer than 250 W-2 forms in the previous year, the IRS notes that such optional status could be changed in the future.
· IRS ACA reporting – Covered employers must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, with the IRS annually.