Frequently Asked ACA Compliance Questions

Yes, if you organization is aware of errors or omissions for previous years, you should file the new or corrected forms as soon as possible. It is important to perform this submission as soon as possible to show your good faith effort to the IRS. This is important to be eligible for good faith effort transition relief from penalties the IRS may assess. 

Yes, the IRS has stated that there is no statute of limitations for ACA penalties. 

To start the calculation, add the total hours work in the month by part-time, variable hour, and seasonal employees. Then, divide the total number of hours by 120. This will give you the FTE count for the month. This calculation must be done each month. 

MV stands for Minimum Value. An employer sponsored healthcare plan is deemed to provide Minimum Value if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the health care plan. 

MEC stands for Minimum Essential Coverage. An example of MEC would be an employer sponsored health care plan. 

Under the federal ACA, an ALE may offer affordable Minimum Essential Coverage (MEC) that provides Minimum Value (MV) to its full-time employees and their dependents. If an organization does not offer MEC with MV, the organization may owe an Employer Shared Responsibility Payment for health care coverage that was purchased on the federal or state exchange. 

The most common method used by employers to determine affordability is the Safe Harbor option of W-2 which uses the employee's annual income, as listed in Box 1, of their W-2 form. In 2021, for example, the cost of the plan to the employee would need to not exceed 9.83% of their annual income. 

You will need to perform a full-time equivalent calculation for all of your employees who are not already categorized as full-time. 

1. For each month, sum up all of the hours of service for all of your variable hour/part-time employees. (Note: if an employee worked more than 120 hours during the month only use 120 hours for the employee in the calculation. This is the maximum number of hours that should be used for an individual.) Divide the total number of hours by 120. This will tell you how many full-time equivalent employees you had for the month. 

2. Add the number of full-time employees with the number of full-time equivalent employees. If the total is greater than 50 your organization will be categorized as an Applicable Large Employer (ALE) and will be required to file 1094 and 1095 forms with the IRS. 

No, the IRS only requires submission of the 1094 and 1095 forms from organizations that are categorized and an Applicable Large Employer (ALE).

The Measurement Method is used to determine which employees meet the IRS definition of an ACA full-time employee. 

• Under the monthly measurement method, the employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month. The offer must be made at the beginning of the month when 130 hours are worked 

• Under the look-back measurement method, an employer may determine the status of an employee as a full-time employee during what is referred to as the stability period, based upon the hours of service of the employee in the preceding period, which is referred to as the measurement period. The look-back measurement method may not be used to determine full-time employee status for purposes of ALE status determination.  

In general, if the hours and pay should be applied to the same tax year for both the W-2 and ACA Reporting.  

If the wages and pay from the last pay period in December are going to be included in the W-2 the tax year December is in, the wages and hours should also be included in that tax year for ACA. 

The ESRP is the Employer Shared Responsibility Provision. This provision from the IRS states that all ALEs must either offer minimum essential coverage (MEC) that is affordable and provides minimum value (MV) to their full-time employees (and their dependents) or potentially make an employer shared responsibility payment to the IRS. 

No, if a full-time employee receives their healthcare coverage from a spouse, as their employer, your obligation would be to record that the employee has declined your offer of coverage. 

Yes, if a qualifying life event, such as marriage, having a baby, or loss of healthcare, occur, the employee can request enrollment into your organization’s health care plan.  

In this case, the answer is it depends. If each company is fully owned by the same entity, your family in this case, the IRS may aggregate the employees at all companies to determine if you have a filing requirement as an ALE. For example, if your family owns two companies and Company A has 25 FT and FTE employees and Company B has 30 FT and FTE employees each company may be considered an ALE and required to file ACA information with the IRS. For more information you should talk to your tax professional and/or review the information on the IRS website.

It depends. The IRS does have an exception for seasonal workers. Per the IRS, an employer is not considered to have more than 50 FT and FTE employees if both of the following apply.
1. The workforce exceeds 50 FT and FTE employees for 120 days or fewer during the calendar year.

2. The employees in excess of 50 employed during the 120 day period are seasonal workers. You can find more information about seasonal workers on the IRS website

ICHRA stands for Individual Coverage Health Reimbursement Arrangement. ICHRAs became available in 2020 as a new type of health reimbursement arrangement in which the employers reimburse employees for some or all of the premiums that an employee pays for health insurance that they purchased on their own. 

The ICHRA is available for companies of all sizes large and small that have at least one W-2 employee. 

Yes, an ICHRA, as with HRA's generally, is considered a group health plan and subject to the same laws and mandates as other group health plans. 

Under the new regulations that went into effect in 2020, a compliant ICHRA can "integrate" with individual health insurance policies and thus avoid violating the ACA requirements. In additional to reimbursing individual health insurance premiums, an ICHRA can reimburse other Section 213(d) medical expenses, such as co-pays and co-insurance. 

As per the IRS, income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations.

While trying to stay compliant internally is an option, we highly recommend using a compliance software like ACA Reporter to help reduce the risk of manual error and to free up time for your employees to focus on other critical tasks. ACA Reporter provides insight into your organizations ACA compliance with an easy-to-understand dashboard. The dashboard provides information on the percent of full-time employees who have been offered coverage, which employees are trending towards full-time status, what employees are not meeting affordability requirements, and more so that you can make sure your are staying compliant.

Yes, when your payroll is imported into the ACA Reporter, the system will perform the calculations to determine how many full-time and full-time equivalent employees your organization has. 

 

Yes, ACA Reporter was designed to assist with both your federal and state filing needs.