Life would be much easier if the Affordable Care Act (ACA) was less confusing. Unfortunately, that’s not the case. The piece of legislation is so detailed and nuanced, that you might find yourself receiving a penalty letter for noncompliance, when you could’ve sworn you’d done everything correctly. Here’s the cold, hard truth – maybe, just maybe, you didn’t.
Does your company consistently teeter between 40 and 50 full-time employees? Have you taken into account that some of your part-time workers may, in fact, be full-time equivalent employees? Did you know this changes everything? If you didn’t, trust us, you’re not alone.
The above questions constitute merely a few factors that might throw you off when it’s time to file with the IRS. We’re here to change that, with a step-by-step approach to achieving ACA compliance.
- Decide your employee measurement period
The moment you establish you’re an applicable large employer (ALE), you need to consult with your business advisor to identify your employee measurement period. For each category of employee and employee status, identify the start and end dates of your tracking period. Only after doing this can you calculate the status of your variable hour employees and confirm whether they are considered full-time equivalent employees under the ACA.
You have options as far as the measurement period is concerned. While most employees usually choose 12-month tracking, the law allows you to track from three months to 12 months. Whichever way, choose wisely, as your stability period will need to mirror the start and end dates of the health plans you offer.
The goal is to complete your tracking before open enrollment; that way you’ll know who should or shouldn’t be offered coverage.
- Move the necessary data into your solution
After deciding upon your measurement period and calculating the status of each employee, you can move forward identifying what employee payroll and census data you’ll need.
Upload this data into whatever solution or software you’re using. Make sure you adhere to the format your solution or software requests. A misconfigured employee profile could lead to a misfiling.
- Ensure the plan you offer your employees is affordable
The ACA requires you to offer your employees affordable plans that provide minimum essential coverage (MEC). These requirements can make finding an ACA-compliant plan difficult. Your best course of action is to consult your health care provider about this. After all, it’s on you to ensure you’re offering affordable health care.
Every year, the IRS uses a specific calculation to dictate what’s “affordable.” And because the requirements change from year to year, this can pose a challenge for employers.
As you’re scouting out potential plans for your employees, do your due diligence. Run through your employees’ income to ensure the plan you choose is affordable for everyone. If the plan you select is affordable to the employee with the lowest salary, you should be good moving forward.
- Prepare your 1095 and 1094 forms
Now it’s time to prepare the required 1095 and 1094 forms for the IRS. Start by ensuring your employee year-end data is complete, accurate, and updated.
From there, fill out your 1095 and 1094 forms. If you’re doing so manually, make sure each box for the month in which the employee was active has been properly filled out. This can be extremely time consuming, which is why you need to stay on top of deadlines. In 2019, the deadline for e-filing is April 1, and the deadline for print filing is Feb. 28.
Once all your data has been entered, preview your forms. This can be a challenging step if you’re unfamiliar with the codes. Make sure all the demographic information and business information is filled out. The IRS will reject 1095 and 1094 forms for even the smallest discrepancies, including a missing digit in the zip code or accidentally filling in a double name.
Print and mail the 1095-C forms to your employees. Your employees will review the documents and make the necessary corrections through ad hoc editing if any of the data is wrong.
- File with the IRS
Once your forms are complete, e-file or paper file the 1095 and 1094 forms with the IRS. If the IRS finds anything wrong, such as a social security number not matching a name, they’ll report back and tell you to make the corrections. Should this occur, audit the information, fix the errors, and send it all back to the IRS.
The ACA might be a confusing piece of legislation, but make no mistake, it is here to stay. Failing to comply with ACA regulations can cost your company millions of dollars in penalties. With the filing deadlines fast approaching, the last thing you need is to be caught scrambling to get your information in order.
Build a foundation, follow the rest of these steps, and you’ll be well on your way to achieving ACA compliance.