A large part of ACA compliance is proving that affordable health insurance was offered to full-time employees. (Photo: Shutterstock)
ACA reporting is not an easy task. Businesses that are Applicable Large Employers (ALEs) are required by law to prove each year that they offer affordable health insurance to all of their full-time employees as a part of the ACA's employer mandate (also known as the Employer Shared Responsibilities Payments). Additionally, the coverage must meet the IRS' standards for minimum value and affordability.
Ensuring Affordable Care Act (ACA) compliance with the IRS can be even more of a challenge for small- and medium-sized businesses that don't have entire departments dedicated to laws and regulations.
The IRS can't just trust that a business is complying with the ACA without proof. Businesses can prove this through tracking certain employee demographics and benefits information year-round. This information then has to be organized, input and generated into 1094 B-C and 1095 B-C forms, which are legal documents employers are required to send to their employees and the IRS. If a business fails to complete ACA reporting or incorrectly reports compliance details, they will receive a Letter 5699 outlining the fines and penalties they are subject to.
Related: 9 ACA employer mandate FAQs
Completing ACA reporting without a technology solution can leave a business vulnerable to thousands of dollars in fines and penalties from the IRS. Technology allows businesses to keep track of details required for ACA reporting throughout the year, instead of scrambling at the last minute to grab required information from various sources. These details are then simply populated into 1094 and 1095 reports. Additionally, several technology solutions provide resources like webinars, brochures, videos, and FAQs to update you on annual ACA changes that could impact reporting.
|How does technology help ensure compliance?
Technology can help businesses perform the actions needed to prove ACA compliance to the IRS.
Only ALEs have to complete ACA reporting. An ALE is defined as any company that has an average of at least 50 full-time employees, or “full-time equivalents” (FTE). The IRS measures a full-time employee as someone who works at least 30 hours a week and also considers an FTE to be any collection of two or more employees whose hours, when taken together, add up to a full-time workload of 30 hours a week.
Determining if a business is an ALE is based on a calculation, which is easier to do with a calculator versus manual math. Several ACA compliance tools are available to ALEs which make it easier to determine whether ACA reporting is required in the first place.
A large part of ACA compliance is proving that affordable health insurance was offered to employees who are considered FTEs. This is a two-step process:
- Track current and historical employee demographic, payroll, and benefits data
- Measure affordability
Technology allows a business to complete these two steps by providing templates to import the necessary information. If a business uses a technology system offered by their broker or payroll provider, plenty of the required data will already be available from previous activity.
Employers are required to send the IRS 1094 B-C forms and to send employees 1095 B-C forms in order to verify that their business obliged with the Employer Mandate. ACA technology allows businesses to generate required legal documents for submission.
Last but not least, employers can use technology to electronically send 1094 and 1095 forms to the IRS and their employees instead of going to the post office and manually mailing each one.
|Choosing a technology solution
When looking for ACA technology to use, businesses can start by reaching out to their insurance broker or payroll provider. Since the data required to prove ACA compliance is a combination of both benefits and payroll, using one of those sources can help get a head start on ACA reporting.
Read more:
- ACA and compliance: Act now, help yourself out later
- What to expect from the ACA in 2019
- 4 key steps for eliminating employees' ACA Form 1095 confusion
David Reid is CEO of EaseCentral, a HR and benefits administration tool for health insurance brokers.
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