At ANCO Insurance, we understand the complexities that the Affordable Care Act (ACA) introduces for employers. Designed to ensure timely, affordable, and appropriate health benefits for eligible employees, ACA compliance requires accurate data tracking and reporting. This is crucial to avoid costly penalties from the IRS and applicable state agencies.
What is ACA Compliance?
Businesses subject to the ACA must offer health insurance that provides minimum essential coverage and value to at least 95% of their full-time employees (including dependents). They are also required to provide:
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Notice of Coverage and Available Benefits
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Summary of Benefits and Coverage (outlining offered plans and employee costs)
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Form 1095-C, which confirms annually the offered benefits
Additionally, Forms 1094-C and 1095-C must be filed with the IRS and relevant state agencies each year, ensuring that timely, affordable, and ACA-compliant coverage was provided to eligible full-time employees. Accurate and complete data alignment is essential to avoid penalties.
Who Must Comply with the ACA?
The ACA applies to Applicable Large Employers (ALEs), which are businesses with 50 or more full-time and full-time equivalent (FTE) employees on average during the previous year. It’s crucial to measure all employees’ hours correctly, as traditional HR status may not reflect ACA benefits eligibility.
For businesses with multiple federal employer identification numbers (FEINs), the counts are combined, treating them as parent and child organizations.
Key Considerations for ACA Compliance Management
Determining Employee Eligibility: ALEs must offer health insurance to at least 95% of their full-time employees and their dependents to avoid penalties. Full-time employees are those who work 30 or more hours per week or 130 or more hours per month.
Confirming Affordability: Employer-sponsored health plans must not cost employees more than a certain percentage of their household income and must provide a specific level of benefits and value. Safe harbor calculations such as W-2 wages, rate of pay, and the federal poverty level can be used to determine affordability.
Reporting Data to the IRS and States: Employers must file Form 1095-C with the IRS and provide it to all employees who were full-time or enrolled in self-insured coverage for any part of the year. Form 1094-C, which is a transmittal form, must also be filed with the IRS, detailing employer-level data.
Responding to IRS Penalty Notices: The IRS issues penalty notices based on the filed Forms 1094-C and 1095-C and other available data. Employers need to maintain clear and accurate data from previous tax years to respond effectively within the typical 30 to 45-day response window.
Role of a Dedicated ACA Compliance Practitioner
To manage ACA compliance successfully, businesses often rely on dedicated practitioners who:
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Capture and report ACA data
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Align hiring strategies with ACA compliance
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Offer minimum essential health coverage to eligible employees from the start of employment
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Regularly track employee statuses
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Respond promptly to IRS penalty notices
Frequently Asked Questions
What does ACA stand for?
ACA stands for Affordable Care Act, which was signed into law on March 23, 2010, and has been implemented in phases since 2014.
What does the ACA require of employers?
ALEs must provide minimum essential health coverage that is affordable and meets minimum value requirements to at least 95% of their full-time employees (including dependents). They must also comply with all ACA reporting requirements to the IRS and applicable states.
What is an ACA penalty notice?
An ACA penalty notice is issued when ALEs fail to file accurate Forms 1095-C and 1094-C or miss submission deadlines. Employers may also receive penalty notices if they do not provide timely, affordable, and appropriate benefits to full-time employees and their dependents.
Navigating ACA compliance can be complex, but ANCO Insurance is here to help. Contact us to learn more about how we can support your business in meeting ACA requirements and avoiding penalties.
