What are the ACA Employer Mandate Requirements?

The Employer Shared Responsibility Provision of the ACA mandates that all ALEs provide health coverage that meets minimum essential coverage and provides minimal value affordable to their full-time equivalent employees and their dependents.

Who is required to report?

Both ALEs and employers providing self-insured health coverage, regardless if they are ALE, must send reports to both their employees and the IRS.

ACA Reporting Reminders:

The Good Faith Effort ended with the 2020 filing deadline; therefore, employers must accurately report or face potential penalties. Earlier this year, the IRS extended the 1095 distribution deadline to March 2^nd of each year. Employers should take advantage of this extension by auditing their forms and making the appropriate corrections before distributing them to their employees. The Inflation Reduction Act of 2022 is a 10-year plan that funds the IRS with 87 billion dollars for improvements in their services and technology, which will likely result in stricter adherence to compliance requirements. 

Deadlines for the 2022 Tax Year Filing:

• February 28, 2023: this is the deadline for ALEs choosing to paper file with the IRS. This option is only available to those ALEs filing 250 forms or less. There is a proposal for the 2023 tax year filing that this threshold will be reduced to ten forms, forcing the majority to file electronically.

• March 2, 2023: this is the updated deadline for ALEs to distribute the 1095 forms to employees.

• March 31, 2023: this is the deadline for ALEs to electronically file forms 1095 and 1094 to the IRS. 

The IRS did not provide much latitude with the scheduling of deadlines. ALEs struggle to focus on accurate and timely ACA reporting due to their attention being shared preparing for Tax Day. Utilizing this year-end guide of questions and checklist will confirm that your 2022 ACA reporting provides the necessary data, proper coding, and correct calculations for the 2022 year.

Guided Checklist of Questions for ACA’s 2022 Year-End Review:

1. Are you an Applicable Large Employer for the 2022 calendar year?
   
2. Have you provided one or more healthcare plans that meet Minimum Essential Coverage?
   
3. Have you offered one or more healthcare plans that meet Minimum Value Coverage?
   
4. Are you eligible for Multi-Employer Arrangement (MEWA) Relief?
   
5. Have you applied one of the approved affordability safe harbors, Federal Poverty, W-2, or Rate of Pay, to some or all your applicable employees?
   
6. Have you validated the application and calculations of your Monthly Measurements or Look Back at Methodology Measurements?
   
7. Have you applied all historical and current payroll data needed for your employee tracking measurements?
   
8. Have you applied all employer-sponsored healthcare plan information related to the 2022 calendar year?
   
9. Have you adequately identified those plans as fully insured or self-insured healthcare coverage? Remember, if you are not an ALE but provide self-insured coverage, you are required to report.
10. Have you applied all eligibility, health plan, and offers of coverage data related to the 2022 calendar year?
11. Have you confirmed that all employee census data is updated and accurate, including SSN, address, and dependent information if applicable for self-funded reporting?
12. If a third party has facilitated in the calculations of the ACA or the population of your ACA forms, have you reviewed all the above information for accuracy? 

In addition to the above checklist of questions, it is strongly recommended that you review the below list of data collected and calculated throughout the year to ensure that your reporting is accurate. Being careless and providing insufficient data will potentially result in an IRS status of “Rejected,” “Accepted with Errors,” or an IRS penalty letter. Those ALEs that overlook this critical step in filing always regret doing so. 

Critical data inaccuracies are known to cause a filing rejection and suggestions on what specifically to look out for:

• Confirm you have provided the correct EIN, the nine-digit number assigned by the IRS to your company. 

• Confirm that the Legal Business Name provided is the same as it is registered with the IRS.

• Ensure company contact’s name and phone number are correct.

• Are you part of an aggregated group? Confirm that all associated business names and EINs are listed appropriately on form 1094.

• Double check Employee Names
• Look closely at employees with hyphenated last names to ensure your data is within the character limits.

• Check all spelling.

• Confirm Employee SSN 
• Employers can use the Social Security website to verify this information.

• Company and Employee Address
• Check to ensure every form has an address and the IRS accepts any characters within the number sequence of the lesson.
• Check the spelling of the city and the two-character state code for accuracy.
• Check that the zip code has the five-digit minimum requirement.

1095 form, Part II Checklist:

• Check that the proper codes required appear on lines 14 and 16.

• Check that the affordability calculations are accurate and that the proper Safe Harbor (FPL, W-2, or Rate of Pay) is applied for line 16. Affordability percentages change annually, so make sure you use the correct formula. For self-only coverage, the amount must be below 9.61% of the employee’s income for 2022.

• Confirm that the employee-required contribution amount for line 15 is accurate. This amount may vary by the employee.

• Check that the zip code is correct for line 17.

Key issues known to potentially trigger an IRS penalty:

• Confirm you have adequately tracked and calculated your employees’ work hours to determine ACA employee status.

• Confirm that your offered healthcare plan meets the following:
• Minimal Essential Coverage (MEC) – offering a MEC plan to at least 95% of their employees protects the employer from the 4980H(a) penalty, which amounts to $2,750 annualized per employee for 2022.
• Affordability and Minimal Value – offering a plan meeting both criteria will protect employers from the 4980H(b) penalty.

• Confirm the dates the plan was offered, enrolled, and disenrolled for each employee. The code should reflect the outcome of offer and the month a change took place on the 1095 form. 

Only after the above questions are answered and year-end reviews are completed should an ALE distribute forms to their employees and file them with the IRS. The attention to detail on this will benefit employers as the IRS places the burden of proof on the employer when trying to mitigate an IRS penalty letter. 

The year-end process is even more complex for employers providing multiemployer health plans, employers with multiple locations, or employers in the staffing or educational industries. The year-end review process and all ACA compliance needs can be simplified with SyncStream’s Full Service Total ACA solution; it will be your best business decision of the year.