AFFORDABLE CARE ACT UPDATE – “GOOD FAITH” NO LONGER GOOD ENOUGH FOR IRS
This past month marked the 11th anniversary of the Affordable Care Act being signed into law. Since that time, employers have grown accustomed to the annual ritual of tracking ACA requirements and filing 1094/1095-C forms. While the practice has become a standard piece of HR department annual workflows, we still find many employers are not only using disparate systems and committing too many man/woman-hours to meet the mandated filing requirements, but large-scale errors and holes in the tracking and filing process still exist.
You may not have noticed that when the IRS extended the deadline for 1095-C reporting at the end of 2020, they also marked 2020 as the end of their “Good Faith Effort Relief” with respect to ACA compliance. Moving forward, we expect stricter enforcement of the Employer Mandate and a significant increase in penalties issued to employers not in compliance.
In speaking to small and mid-sized employers about this, we’re finding that most are unaware of the recent changes and potential implications of minor typos or clerical errors in their ACA reporting. For 2021, the maximum penalty is $2,700 per employee per year. That means for a company with 200 full-time employees, they could be penalized up to $459,000 at the end of 2021 and each year going forward if not fully compliant1.
Of the employers we’ve spoken to that have had compliance issues, many shared that the law was taken too lightly internally and dismissed by senior leadership as just another regulatory headache. With an expected increase in enforcement and fines issued, it is essential to review your current systems and practices to ensure compliance and avoid costly mistakes.
As a refresher, the “Play or Pay” employer mandate requires that you offer coverage to 95% of your full-time employees. Employers with large numbers of part-time or non-benefit eligible employees should carefully and accurately track and measure hours worked to determine if any employees exceed the 30 hours per week threshold that would consider them a full-time employee under the ACA. Check out this link for additional details on the ACA Employer Mandate and tracking and filing requirements.
On another note, a number of individual states have enacted their own individual mandates and are requiring employers with employees in those states to file their 1095Cs with the states. Not all ACA reporting vendors are set up to do this.
The right combination of properly implemented technology systems, company practices and expert guidance from an employee benefits or HR consulting firm is essential for employers today to remain fully compliant, breeze through audits and most importantly, avoid penalties and fines.
ACA compliance cannot be a “one-size-fits-all” approach. If you’re concerned about possible holes in your current process or would like to learn more about best practices in ACA tracking, reporting and filing, please reach out to the team here at EONE Benefit Solutions. Since 2010, we have been actively engaged with our clients to solve all ACA-related problems, bringing together the best vendors, technologies and processes to accurately and efficiently meet their unique business requirements.
1 Payment for not offering coverage to at least 95% of your full-time equivalent employees in 2021 is $225 per month for every employee (after excluding the first 30 employees from the calculation).
Are you ACA ready? Contact EONE Benefit Solutions