Overcoming Common ACA Compliance Challenges

ACA regulations are complex and subject to frequent changes and updates, which can make it difficult for employers to understand what their obligations are. Often, employers can find themselves struggling with the fine print of the ACA, such as:

• Defining full-time and full-time equivalent employees.
• Determining affordability of the healthcare coverage they offer.
• Understanding which benefits qualify as minimum essential coverage.

In turn, this can lead to confusion and increase the risk of non-compliance.

As an employer seeking to comply with the ACA, there are several elements you need to monitor to meet regulatory requirements and avoid penalties. These factors include:

• Employee status: Employers must carefully track employee hours to determine who is considered full-time, as these employees must be offered health insurance coverage. Additionally, variable-hour employees, such as part-time or seasonal workers, must be accounted for to determine whether they count toward full-time equivalent status.
• ALE status: Only employers designated as an Applicable Large Employer are subject to the ACA’s reporting requirements, which means organizations should regularly assess whether they have 50 or more full-time or full-time equivalent employees.
• Health coverage offerings: To comply with the ACA, employers must provide affordable and minimum essential coverage to all full-time employees and their dependents. The coverage offered must also provide a minimum value, which means it covers at least 60% of the total allowed cost of benefits for a standard population.
• Form 1095-C and 1094-C reporting: Employers must maintain accurate records and track data that’s used to complete Forms 1095-C and 1094-C for each full-time employee, and ensure these forms are submitted to the IRS by the deadline.

Employers may find themselves navigating complex employee situations that can make it challenging to comply with the ACA’s requirements. These scenarios require close attention to make correct decisions regarding their eligibility. For example, variable-hour employees, such as those whose hours fluctuate week to week, can make it hard to determine full-time status under the ACA. To avoid this, employers can use look-back measurement periods to determine an employee’s average hours worked and whether they’re classified as a full-time employee. 

Seasonal employees and part-time employees can also pose challenges for employers since their total working hours may not meet the threshold per week or month. With accurate time tracking, employers can ensure proper classification.

Form 1095-C and Form 1094-C both require detailed and accurate coding to reflect whether an employee was offered health insurance coverage that was affordable and met the minimum essential coverage standards. Errors in this coding can cause you to receive penalties from the IRS or lead to inquiries or audits, which can be costly and time-consuming.

ACA reporting is a time-consuming process for employers because it requires detailed tracking, data management, and strict compliance requirements. Employers, especially those with large and complex workforces, need to accurately report a wide range of information to the IRs regarding the health insurance coverage they offer. Depending on bandwidth, maintaining compliance can be a major challenge for employers without the resources to handle the complexities of ACA reporting.

ACA reporting often overlaps with other crucial business activities, such as preparing year-end financials or managing year-end payroll for tax season. With these responsibilities coinciding with one another, busy HR and payroll departments can become strained, especially for organizations that need to coordinate data across multiple systems, which can result in errors and potential penalties.

Employers are responsible for adhering to the ACA’s strict reporting deadlines. Each year, employers must distribute IRS Form 1095-C to employees by January 31 and file both Form 1095-C and 1094-C with the IRS by February 28 if filing by paper or March 31 if filing electronically. These deadlines frequently fall under busy periods for employers, such as year-end payroll and tax preparation, which can add to the administrative burden during this time of year.