ACA Compliance and Reporting: An HR Guide

Your Responsibilities as an Applicable Large Employer (ALE)

If you qualify as an ALE, the ACA outlines two provisions to follow:

• The employer shared-responsibility provision
• The employer information reporting provision for offers of minimum essential coverage

There are penalties if an organization doesn't follow the rules. That's why it's important to know if the ACA applies to your organization and what you need to do to comply.

What Defines an ALE?

An ALE is any employer with an average of at least 50 full-time employees in a year, according to the ACA. Under the ACA, tax-exempt organizations and government entities also qualify as ALEs if they meet that 50 full-time-employee criterion.

To determine if a member of your team was a full-time employee for a certain month, consider this: Did they have at least 130 hours of service for the month or at least 30 hours per week through the month? If the answer is no, then they were part-time for that calendar month. 

But there's a bit more math to do. You also need to determine how many part-time hours of service you have received throughout the month. That lets you figure out the equivalent number of full-time employees.

There is a simple formula to figure out how many full-time employees you have: 

• Full-Time Employee Count + (Total Part-Time Hours/30) = Total Full-Time Employees.

While an ALE could be a single entity, it may also be a group of related entities — in which case, the group members are called ALE members.

Employer Shared-Responsibility Provision

This provision says you have to offer full-time employees affordable health plans with minimum essential coverage (MEC). MEC is coverage that meets the ACA's minimum requirements, according to the IRS. According to the ACA, this includes:

• Employer-sponsored coverage
• Coverage from the individual market
• Self-funded health coverage

If you don't offer MEC to at least 95% of your full-time employees and their dependents, you will face a penalty. In 2024, this was $2,970 for each enrollee.

Affordability According to the ACA

To help make sure employees can afford coverage, the ACA also outlines the minimum value an employer-sponsored health plan must provide. The plan must cover at least 60% of the total allowed cost of benefits, according to the IRS.

The plan should also cost no more than 8.39% of an employee's household income. You may not know each employee's household income and that's okay. There are three ways the law lets you estimate it: 

• Form W-2 wages
• The employee's rate of pay
• The federal poverty line

The MEC you offer to at least 95% of your full-time employees and their dependents needs to cost them no more than that 8.39% amount. If it cost them more, you would face penalties for each employee who had to buy health insurance coverage through the ACA Health Insurance Marketplace because it implies your coverage wasn't affordable. In 2024, this amount was $4,460 per enrollee.

How HR Can Meet ACA Reporting Requirements

You have to file specific forms with the IRS to show your organization is complying with the ACA.  The main form you will send in to report your ACA provisions is Form 1094-C.

Form 1094-C

The IRS requires ALEs to report the health coverage they've offered to each employee. You also need to report if these employees have enrolled in a health care plan. You report this information by filing Form 1094-C. Even if you don't offer coverage or your employees don't enroll in the coverage you offered, you still need to file this form. 

Employees will file Forms 1095-C to verify they were offered health coverage that met the minimum value standards.

Information included in Form 1094-C

Form 1094-C is divided into four parts. In Part I, you fill out information on the employer, including:

• Employer name
• Employer Identification Number (EIN)
• Address
• Name of contact person
• Phone number
• Name of designated government entity, if applicable
• Number of Forms 1095-C that you're submitting with the form
• Authoritative transmittal (the main Form 1094-C, if you are submitting multiple)

In Part II, you provide the ALE member information, including:

• Number of Forms 1095-C that are being filed either by or on the behalf of the ALE member
• Member of an aggregated ALE group
• Certifications of eligibility
• Your signature and title, along with the date

Part III covers the monthly ALE member information. Here, you indicate whether your organization offered minimum essential coverage throughout the calendar year to at least 95% of your full-time employees.

Finally, Part IV asks you to fill out the names and EINs of other ALE members in your aggregated ALE group (if applicable) from the year.

On the Authoritative Transmittal, you will indicate the eligibility requirements that you meet on Line 22. There are two methods for qualification here:

• Qualifying Offer Method: You can check this box if you've made a qualifying offer to one or more of your full-time employees throughout their employment that year.
• 98% Offer Method: This applies if you have offered affordable health coverage to at least 98% of your full-time employees through their employment. The coverage must meet minimum value standards, and you should have also offered minimum essential coverage to the employees' dependents.

Reporting Deadlines

There are two dates to keep track of when filing Form 1094-C:

• Paper filing: Due by Feb. 28
• Electronic filing: Due by March 31

If these dates happen to be Saturdays, Sundays, or federal holidays, the due dates are instead the following business day. If necessary, you can file a Form 8809 on or before the due date to get an automatic 30-day extension.

If you realize you made a mistake after filing Form 1094-C, fill out a new form and put an X in the box next to "Corrected" at the top of the first page. There is no stated deadline for this, but send it as soon as possible. You don't need to send anything else with the corrected form.

Penalties

To ensure that ALEs meet their reporting requirements, the IRS imposes penalties for non-compliance. These can all be waived if you can establish a reasonable cause.

The IRS releases a notice outlining penalty fees each year. In 2024:

• If you didn't file a correct information return, the penalty is $310 for each return with incorrect information, up to $3,783,000
• If you filed an incorrect payee statement, the penalty is $310 for each incorrect statement, up to $3,783,000
• If the IRS discovers you have intentionally disregarded the requirement to file returns with the necessary information, there are special rules that increase the per-statement and total penalties

If you have to submit more than 10 information returns during the year, the IRS will require you to file electronically. If you can't do this, you may receive a hardship waiver by filing Form 8508 at least 45 days before your due date. If you don't file electronically and don't have an approved waiver, you may face a $310 penalty per return unless you establish reasonable cause.

How to Make ACA Reporting Easier

With all the information required to report for ACA compliance, it's easy to feel a bit overwhelmed!

If you notice anxious thoughts springing up, take a breath and remind yourself you're not just avoiding penalties — you're also building trust with employees who depend on your coverage. You help reduce their stress from high out-of-pocket medical expenses and help them get access to preventative care services. When they know you're taking care of their wellbeing, you help them be more productive.

Here are some tips to manage your ACA compliance more easily.

Maintain Accurate Employee Data Throughout the Year

Verifying the accuracy of all your data for each employee's entire year is a mammoth task. But, tracking and verifying this data every month may make it easier. If you update your data every month, you can review less information at a time, speeding the process up. Plus, at the end of the year, you'll have the full records ready to go.

Use ACA Compliance Software to Collect and Report Data

Manually collecting and reporting data can lead to errors. Legal and reporting rules can be complicated and can change from year to year, too.  ACA compliance software may make data collection and reporting easier by helping you with tasks like:

• Identifying staff members who qualify for coverage
• Keeping up with rule changes 
• Generating and filing forms accurately 
• Centralizing your data so information is easily accessible

Establish Clear Internal Communication Channels Around Coverage Options

Develop an effective way to give employees clarity on the type of coverage you're offering them. This also saves time when you need to review information on different employees' coverage.

Actively Advance Workforce Wellness

Maintaining ACA compliance is tricky, but a few proactive steps can make the task much easier for you. Collecting accurate employee data throughout the year and storing it in ACA compliance software can make a big difference in the time you spend filing your forms with the IRS at the end of the year. Plus, every employee will have an option for health coverage, giving them peace of mind and protecting them from large out-of-pocket health payments.

Employee wellbeing programs are another great way to help your employees. Fitness and mindfulness programs, like a gym subscription or yoga class, can help them stay healthier and reduce stress. These kinds of programs empower employees to be more productive at work, improving business outcomes as well.

Wellhub helps HR teams leverage the advantages of employee wellbeing. Talk to a Wellbeing Specialist today to learn more about how we can help your organization thrive!

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