ACA Compliance: Employee Misclassification
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. We hope you find it useful.
Our IRS-certified ACA Software or ACA Full Service option can help you with tracking and compliance year-round.
One thing to look out for this year is employee misclassification, as some states have broadened the definition of “employee.” Classifying your employees correctly can help you avoid fines and penalties, (both federal and state-issued).
It’s important to correctly classify new employees and extend the appropriate coverage to qualifying individuals.
Companies that remove W-2 employees from regular payroll and pay them as Independent Contractors could incur steep ACA noncompliance penalties – as the IRS may notice an employee status change from prior years.
This year several states (CA, NJ, and VA) have broadened the definition of “employee.” Staying current on employee classification laws is crucial for ACA compliance, as well as compliance with state and federal regulations.
In California, intentional misclassification of an employee as an independent contractor can result in penalties between $5000 – $25,000.
In New Jersey, employers may be fined (1st violation $250 per misclassified employee, and up to $1000 for subsequent violations) as well as pay a penalty to the misclassified employee.
Virginia has steeper penalties and provides a right of action for employees to recoup any lost wages/benefits due to misclassification.
In any situation, employee misclassification can open the possibility of legal action taken by individual workers – as well as financial risk due to possible ACA penalties and other fines by the IRS, Department of Labor, and State Agencies.
Our ACA experts can help with questions about employee classification or ACA questions in general. We also provide penalty relief consultation services.
We offer ACA Full Service if you would like us to handle everything for you. After a HIPAA agreement is signed by both parties, the employee information is turned over to us, and we do the rest, including:
– Initial data entry/importation
– Consultation to set up Safe Harbors and Measurement Periods
– IRS TIN (SSN) Matching to prevent AIRTN500 errors
– Electronic (PDF) 1095-C Validation drafts
– Sending Employee 1095-C copies to the employer for redistribution
– Electronic (XML) filing with confirmation from the IRS
– Notification of errors reported by the IRS
Or, our IRS-certified ACA software helps you maintain compliance year-round. We also provide optional proxy submission for our software customers.
Call 800-969-7900 to learn more. Or contact us – we are here to help.