How to remain ACA compliant during an acquisition
Affordable Care Act (ACA) compliance is likely the last thing on anyone’s mind during an acquisition.
But that would be a mistake.
Even when everything looks and feels similar after one company purchases another – the same employees, the same company name – that’s not true about their ACA reporting.
For instance, say a small company wasn’t an applicable larger employer (ALE) when it decided to purchase another non-ALE. Prior to the purchase, neither of these companies were required to provide healthcare with minimum essential coverage (MEC) that’s affordable and offers minimum value to full-time equivalent employees.
However, if after the point of purchase, the new combined company has at least 50 full-time equivalent employees, it is now an ALE, and everything changes. It needs to offer coverage and report it.
We can’t stress these points enough: The ACA is complicated, it’s not going away anytime soon, and there are consequences for failing to comply.
With that in mind, here are some ACA guidelines to consider if you’re planning to acquire another company.
The EIN dictates everything
What is the purchasing company doing with the acquired company’s Employer Identification Number (EIN)? Everything from an ACA perspective stems from this question.
Purchasing companies have a few options:
Company A can disassemble Company B and acquire its employees under Company A’s existing EIN.
Company A can disassemble both companies and create a brand new EIN.
Company A can choose to keep both EINs separate.
Each of these decisions brings about different reporting nuances, which we’ll get into, as the ACA is dictated by the EIN.
However, the most important thing is that both organizations have complete and accurate payroll and health benefits information, since the two companies most likely weren’t providing health benefits under the same provider.
After the acquisition, the companies need to report accurately on the previous health benefits and the new company needs to do the same on the new health benefits. After all, an acquired company’s health benefits usually stop at the point of acquisition. After that, a new health policy is created, which requires a further conversation about what’s actually being covered moving forward.
Who’s responsible for filing with the government?
Whoever was on the legal EIN record is responsible for the filing. For the purchased company, that means the owner is responsible for filing with the IRS for the current reporting period up to the point of purchase.
Once the acquisition goes through, the new owner becomes the registered legal EIN owner and is required to report for the rest of the year.
If the purchased company is part of a larger control group, it would need to file a 1095-C with the control group from the beginning of the measurement period through the point of purchase, and then file a 1095-C with the organization that purchased it from the purchasing point through the end of the measuring period.
A purchasing company can choose to keep its own EIN and acquire another EIN into its company. But this still requires changes – whether with health benefits information or the company’s principal names on record with the government.
All of this information will determine who’s responsible for reporting, up to what point (before the acquisition) they need to report to, and when they need to start reporting after the purchase.
Has the company you’re purchasing filed for the previous year?
Just like you would do a title search when purchasing a new home, you should check to make sure the company you’re purchasing is up to date on its compliance submissions. This includes ACA, EEO-1, and any other types of compliance.
Once you’ve done that, you need to understand the outcomes of those submissions. Were there any potential liabilities that you need to be aware of? For example, despite filing, maybe the company didn’t offer benefits to everyone it was supposed to and therefore you could be subject to penalties down the road.
Things to remember
The simplest ACA reporting scenario involves one ALE purchasing another ALE. It becomes more complicated if each company offers different health benefits using different providers.
Regardless of the situation, it’s imperative that all companies stay on top of their tracking. They need to track the hours of their variable-hour employees, know where they stand from an ALE standpoint, and if applicable, offer MEC that’s affordable and provides minimal value when required.
As long as a company keeps up-to-date records and has all the necessary data, ACA compliance shouldn’t be an issue in the present, or in the future, if you decide to acquire another company.
Have Questions or Need More Information?
Affordable Care Act (ACA) compliance is likely the last thing on anyone’s mind during an acquisition.
But that would be a mistake.
Even when everything looks and feels similar after one company purchases another – the same employees, the same company name – that’s not true about their ACA reporting.
For instance, say a small company wasn’t an applicable larger employer (ALE) when it decided to purchase another non-ALE. Prior to the purchase, neither of these companies were required to provide healthcare with minimum essential coverage (MEC) that’s affordable and offers minimum value to full-time equivalent employees.
However, if after the point of purchase, the new combined company has at least 50 full-time equivalent employees, it is now an ALE, and everything changes. It needs to offer coverage and report it.
We can’t stress these points enough: The ACA is complicated, it’s not going away anytime soon, and there are consequences for failing to comply.
With that in mind, here are some ACA guidelines to consider if you’re planning to acquire another company.
The EIN dictates everything
What is the purchasing company doing with the acquired company’s Employer Identification Number (EIN)? Everything from an ACA perspective stems from this question.
Purchasing companies have a few options:
Company A can disassemble Company B and acquire its employees under Company A’s existing EIN.
Company A can disassemble both companies and create a brand new EIN.
Company A can choose to keep both EINs separate.
Each of these decisions brings about different reporting nuances, which we’ll get into, as the ACA is dictated by the EIN.
However, the most important thing is that both organizations have complete and accurate payroll and health benefits information, since the two companies most likely weren’t providing health benefits under the same provider.
After the acquisition, the companies need to report accurately on the previous health benefits and the new company needs to do the same on the new health benefits. After all, an acquired company’s health benefits usually stop at the point of acquisition. After that, a new health policy is created, which requires a further conversation about what’s actually being covered moving forward.
Who’s responsible for filing with the government?
Whoever was on the legal EIN record is responsible for the filing. For the purchased company, that means the owner is responsible for filing with the IRS for the current reporting period up to the point of purchase.
Once the acquisition goes through, the new owner becomes the registered legal EIN owner and is required to report for the rest of the year.
If the purchased company is part of a larger control group, it would need to file a 1095-C with the control group from the beginning of the measurement period through the point of purchase, and then file a 1095-C with the organization that purchased it from the purchasing point through the end of the measuring period.
A purchasing company can choose to keep its own EIN and acquire another EIN into its company. But this still requires changes – whether with health benefits information or the company’s principal names on record with the government.
All of this information will determine who’s responsible for reporting, up to what point (before the acquisition) they need to report to, and when they need to start reporting after the purchase.
Has the company you’re purchasing filed for the previous year?
Just like you would do a title search when purchasing a new home, you should check to make sure the company you’re purchasing is up to date on its compliance submissions. This includes ACA, EEO-1, and any other types of compliance.
Once you’ve done that, you need to understand the outcomes of those submissions. Were there any potential liabilities that you need to be aware of? For example, despite filing, maybe the company didn’t offer benefits to everyone it was supposed to and therefore you could be subject to penalties down the road.
Things to remember
The simplest ACA reporting scenario involves one ALE purchasing another ALE. It becomes more complicated if each company offers different health benefits using different providers.
Regardless of the situation, it’s imperative that all companies stay on top of their tracking. They need to track the hours of their variable-hour employees, know where they stand from an ALE standpoint, and if applicable, offer MEC that’s affordable and provides minimal value when required.
As long as a company keeps up-to-date records and has all the necessary data, ACA compliance shouldn’t be an issue in the present, or in the future, if you decide to acquire another company.
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