What is ACA compliance? And when do ACA guidelines kick in? 

The Affordable Care Act (ACA) was enacted in 2010. Since then, small businesses have had to navigate ACA employer requirements.  If your business falls under the ACA eligibility rules, you must follow ACA guidelines or face a stiff financial penalty.   

What Are ACA Reporting Requirements? 

Each year, employers have an obligation to turn in a few forms to the Internal Revenue Service (IRS). Form 1094-C and Form 1095-C are ACA employer requirements that must be turned in each year. In addition, there is a list of notices that employers must give their workers, like the requirement to notify employees about health insurance options on the Health Insurance Marketplace.

To ACA comply, employers must also offer health insurance to employees if they meet ACA eligibility. You must offer health insurance to full-time employees who work at least 30 hours a week on average during the measurement period. 

What Employers Must Comply with ACA Rules? 

Certain employers are required to comply with ACA guidelines. You must offer health care if you have more than 50 full-time employees. They don’t have to accept this coverage, but you are required to have it available for full-time workers if they want it.  

The calculation of full-time workers is made by adding the hours worked by part-time workers to create a full-time equivalent (FTE). Your full-time employees directly count as full-time employees. Then, you add your FTEs to your full-time workers to calculate the total number of full-time employees you have. To calculate your FTEs, you must add up all of the hours your part-time workers completed during the month. Then, divide this total by 130. The resulting figure is the number of FTE employees you have. 

As a part of the ACA guidelines, you must continue to track the number of full-time workers throughout the year. Then, your ACA eligibility is determined based on the average number of workers you had during the prior year. Even if your employee count drops below 50 in the current year, you will need to continue offering health insurance as long as the prior year’s average employment was more than 50 full-time workers.  

The ACA Compliance Checklist 

What is ACA compliance? More importantly, what can your company do to follow ACA rules? With the following ACA compliance checklist, you can make sure that you stay on top of your legal requirements.  

Form 1094-C

Form 1094-C is sent to the IRS and is essentially a cover sheet for Form 1095-C. It is sent on a yearly basis and is due by April 1 if you are filing electronically. For people who send in paper returns, this form is due on February 28. 

Form 1095-C

As a part of your ACA employer requirements, you must file form 1095-C each year with the IRS. It has the same due dates as 1094-C. With Form 1095-C, you must send in a form for each employee to the IRS. You also have to send a copy of Form 1095-C to each individual worker because this form informs them about their ACA eligibility and coverage. Then, employees can use Form 1095-C to get the ACA’s premium tax credit. 

Reporting Deadlines 

Each item on the ACA compliance checklist comes with set due dates. As a part of your compliance checklist, write down the due dates for each form. You should also track your measurement periods carefully so that you can determine which employees are eligible for healthcare and provide them coverage when they need it. 

Required Notices 

Additionally, there are a number of required notices you must send out each year under ACA rules. For instance, employers must provide workers with a notice about the availability of healthcare insurance through the Health Insurance Marketplace. Employers must also give workers a Summary of Benefits and Coverage (SBC) about what their health plan covers. Other than tax forms, the SBC, and the notice about Health Insurance Marketplace options, you may also have other required notices from your state. Each state has different rules, so it is important to understand what your local requirements are for insurance coverage. 

Plan Design 

Your plan is required to meet certain ACA guidelines. Specifically, it must be considered affordable and offer a minimum value. Typically, any plan that has a bronze, silver, gold, or platinum designation will meet the minimum value requirement. To be called affordable, the plan must cost the employee less than 8.39% of their household income. Because employers don’t know the employee’s total household income, there are three different safe harbor options you can use to determine your plan’s affordability. 

• Federal Poverty Line Safe Harbor: With this safe harbor option, you must multiply the federal poverty level by 8.39%. This method is rarely used because it means employers must pay a larger portion of health insurance costs. 
• Rate of Pay Safe Harbor: This safe harbor is calculated by multiplying the employee’s salary or rate of pay by 8.39%. The calculation doesn’t consider overtime, so it isn’t a great option if your employees have widely varying rates of pay. 
• W2 Wages Safe Harbor: When you use this safe harbor option, you simply look at box 1 on an employee’s W2. Typically, employers use W2 wages or rate of pay to calculate the monthly premium cost for their employees.

Tracking Employer Shared Responsibility 

Each year, you need to determine if you have any employer shared responsibility. Applicable large employers (ALEs) have 50 or more full-time employees during the prior year. If you meet this definition, you must offer employees affordable health insurance. Your determination can change from year to year, so you must carefully track the number of full-time employees and FTES that you have on your payroll. 

Measuring Which Employees Are Eligible for Insurance 

As an employer, it is your job to determine which employees should receive health insurance. Full-time workers must be offered health insurance. You can determine if your employee ought to be offered health insurance by using the monthly measurement method or the look-back method. In general, the same measurement method must be used with all of your employees. 

Monthly Measurement Method 

With the monthly measurement method, you look at the hours an employee works each month to determine if they will get coverage. Anyone who works an average of 30 hours a week or more must be offered health insurance. If you have employees with a lot of variability in their hours, this method is not feasible. 

The Look-Back Method

The look-back method uses an extended time frame, like a year, as the measurement period. During this period, you need to add up the employee’s hours and figure out their average number of hours worked per month. After the measurement period is calculated, the employee enters the stability period. This is when they are offered insurance based on their employment status. Typically, the stability period matches the insurer’s 12-month plan year. 

What Is ACA Compliance? 

What is ACA compliance? As a small business owner, how do you follow ACA guidelines and legal requirements? 

By learning about ACA eligibility rules, you can determine if you are considered an ALE. Once you are required to offer health insurance to your employees, you can use this ACA compliance checklist to make sure you follow ACA rules and requirements. 

To learn more about ACA reporting services and your ACA requirements, reach out to our team of HR and payroll experts today.