Effective ACA Software Helps Simplify Data Management
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. We hope you find it useful.
HR professionals and office administrators are often the unsung superheroes of an organization: Experts on policy and procedures, able to understand new regulations with a single webinar, responding quickly to help make the best decisions for the company.
Effective regulatory compliance management is crucial for avoiding fines and penalties. Among the most heroic of tasks may be navigating the complexities of Affordable Care Act compliance management.
If your company has recently grown in size to become an ALE, maintaining ACA compliance is crucial to avoiding potentially steep penalties. Depending on the complexities of tracking employee data at your company, manual tracking may require a herculean effort to avoid receiving an ACA warning letter or penalty notification:
– Letter 5699 requests a company’s reason for not filing Forms 1094-C and 1095-C in previous years.
– Letter 5005-A is a penalty notification that follows Letter 5699.
– Letter 972CG is sent to employers for late ACA filings.
– Letter 226J (4980H B Penalties) notifies an Applicable Large Employer that they may be liable for an Employer Shared Responsibility Payment (ESRP).
If your company has employees with fluctuating hours, staff working different jobs at different locations (such as at a restaurant), temporary workers, or multiple EINs, manual tracking of employee hours can be cumbersome.
Comprehensive ACA software streamlines ACA compliance management data year-round to help you avoid costly penalties.
Under the ACA, companies with 50+ full-time employees (or full-time equivalents) must provide qualifying health insurance coverage to full-time employees and their dependents. Qualifying coverage is also referred to as Minimum Essential Coverage and must be considered affordable under IRS criteria.
Employees are considered full-time by the IRS if they average at 30+ hours of work per week, or 130+ hours per month. The monthly measurement method and the look-back measurement method are the two methods for determining full-time status.
Under the ACA, insurance plans must cover various categories such as doctors’ services, hospital care, and prescription drug coverage.
The 4980 penalties can be the costliest, and here are the 2022 amounts according to the ACA Times:,
For the 2022 tax year, the 4980H(a) penalty amount is $229.17 a month or $2,750 annualized, per employee. The IRS issues the 4980H(a) penalty when:
An employer doesn’t offer Minimum Essential Coverage (MEC) to at least 95% of its full-time employees (and their dependents) for any month during the tax year, and
At least one full-time employee receives a Premium Tax Credit (PTC) for purchasing coverage through the Marketplace.
Here’s an example of how the IRS calculates the penalty:
If an organization in 2022 has 300 full-time employees, and one of these employees receives a PTC for 12 months, the cost of this penalty would be $742,500.
The per-employee penalty applies across all 300 full-time employees, minus 30, even if only one employee receives a PTC.
The 2022 4980H(b) penalty, or Employer Shared Responsibility Penalty for failure to offer coverage that meets affordability and Minimum Value (MV), is $343.33 a month or $4,120 annualized, per employee. This is the penalty amount if an employee is assessed if the 4980H(a) does not apply.
This penalty is assessed on a monthly basis for every full-time employee that did not receive an offer of coverage or received such an offer, but the offer was either unaffordable or did not provide MV or both AND the employee received a PTC for that month.
For example, an employer with 10 full-time employees who each received a PTC for six months would see an IRS penalty of $20,600.”
If you are manually tracking or doing most of the work yourself on behalf of your payroll service for ACA compliance and reporting, comprehensive ACA software can help you simplify and comply.
Forms 1095-B and 1095-C
Effective ACA software can help with data accuracy, and now that Good Faith Transition Relief has ended, inaccurate reporting may result in penalties. Accurate coding is important on forms when filing and manual tracking may be prone to errors.
Form 1095-B provides information about employee health insurance coverage including if the plan met Minimum Essential Coverage and was considered affordable under IRS criteria.
According to the IRS the 1095-C form “is filed and furnished to any employee of an Applicable Large Employers (ALE) member who is a full-time employee for one or more months of the calendar. ALE members must report that information for all twelve months of the calendar year for each employee.”
Form 1095-C incudes basic employee information including name, address, birth data, and social security number. It also shows the type or offer of coverage an employee received, how much it cost, and if the offer met Minimum Value (MV) and Minimum Essential Coverage (MEC) criteria.
Our comprehensive ACA software and services can help you simplify ACA compliance. Our ACA software or Full Service option can help ease the burden of managing ACA-related data year-round and filing:
• Effective compliance management to help avoid steep penalties
• Our IRS-certified ACA software identifies full-time employees and tracks part-time employees trending towards full-time
• Track employees adding coverage, statuses changing, and contributions going up or down
• Automation helps ensure data accuracy as opposed to manual tracking
• ACA Full Service is the easiest option – just provide a spreadsheet with employee data, and we do it all for you throughout the year including filing
Our ACA software consolidates an employee’s hours across multiple companies, and handles the complex reporting rules affected by common ownership.
We are also IRS-approved for optional proxy submission for our software users. We can also help with social security validation and filing corrections.
If your company has received a penalty notification, we can help. Our penalty response consultation services help you save time and energy spent going through the appeal process. We’ve helped many companies avoid or drastically reduce penalties.