Understanding Penalties for ACA Non-Compliance
Under the Affordable Care Act (ACA), applicable large employers (ALEs) across the United States must offer affordable health insurance options to their full-time employees. An ALE is any company that employs an average of at least 50 full-time workers. To enforce the legislation, the federal government fines companies that fail to provide affordable health plans or meet reporting requirements. These penalties can become quite costly, so it's important to do everything you can to achieve IRS ACA compliance.
Types of ACA Non-Compliance Penalties
Although the cost varies depending on the number of employees affected, penalties for ACA non-compliance can total thousands or even hundreds of thousands of dollars. Learn about some of the most common ACA compliance penalties below.
Failure to File an Information Return
The IRS requires ALEs to file Forms 1094-C and 1095-C to maintain ACA compliance. If you forget to file these forms by the deadline, you could face a penalty of $100 per missing return, with fines increasing by $270 with each failure. Fines for failing to file cannot exceed $3,275,500 in a year, but penalties for multiple missing returns can add up fast. You need to file on time for all your full-time employees if you hope to avoid this fine.
Failure to Provide Correct Payee Statements
Under the ACA, employers must provide specific health insurance information to their employees by deadlines established by the IRS. Employees need this information to find out if they qualify for the premium tax credit when filing their individual tax returns. Failure to provide correct payee statements to your employees can result in the same penalty as failure to file.
Employer Shared Responsibility Payments
The IRS also penalizes employers that fail to provide affordable coverage to their employees. You may face this kind of ACA compliance penalty if:
- You don't offer minimum essential coverage to your full-time employees
- You only offer insurance that is unaffordable
- At least one of your employees received or qualified for a premium tax credit
- Your company did not qualify for an affordability safe harbor
The IRS sends letter 226J to notify employers that need to make employer shared responsibility payments.
How to Stay ACA Compliant
To protect your organization from costly fines, you need to meet the requirements outlined in the ACA. Here are a few tips to help you stay in compliance.
Offer Affordable Health Insurance
To stay in compliance, ALEs must offer affordable health insurance to at least 95% of their full-time employees. A full-time employee is someone who works 30 hours per week or more on average, or 130 hours per month. To avoid penalties, make sure you offer insurance to the required number of full-time employees. An affordable plan is one that even your lowest-earning employee can afford.
Fill Out 1094 and 1095 Forms Accurately
The IRS will reject incomplete and incorrect 1094 and 1095 forms. To avoid penalties, ensure the information you enter is correct and up to date. If you're not sure whether you have accurate employee demographic information, ask workers to confirm.
File Your Returns on Time
You may face penalties if you fail to file your returns on time — even if you've met all other ACA requirements. Check the deadlines for the year you're filing and remember that paper filing and e-filing deadlines may differ.
Preparing for an IRS Audit
If the IRS finds ACA reporting mistakes, irregularities or other "red flags" when reviewing your business's tax returns, it could decide to conduct a comprehensive audit. Factors that might trigger an audit include vague, nonspecific information and a workforce with unpredictable work hours, especially if there are multiple employees who don't meet the 130-hour-per-month threshold required for ACA coverage eligibility.
Should you receive an audit letter from the IRS, it will likely request documentation. You can ensure readiness for an audit by implementing sound record-keeping practices that include maintaining the following documents:
- Records of the steps you've taken to meet ACA requirements
- Contracts with your health services provider
- Copies of notices such as those related to grandfathered status or the enrollment of children until they reach age 26
How to Handle ACA Reporting Penalties
What happens if the IRS audit findings conclude you're not in compliance and must pay the shared responsibility penalties? It will notify you by sending Letter 226J. If you don't reply within 30 days, the IRS will assume you agree with its findings and you will need to pay the penalty.
Your options when receiving Letter 226J include:
- Pay what you owe: If you agree with the IRS's determination, your only recourse is to pay the requested amount. You can either notify the IRS of your intention to do so or wait for it to send another letter outlining your payment options.
- Dispute the findings: If you believe that the IRS made an error and penalties should not apply, you must respond with acceptable proof, such as copies of Form 1094-C and 1095-C. You should also request assistance from your health plan provider.
Avoid Penalties With SyncStream's Solutions
At SyncStream, we have developed an easy-to-use, cloud-based solution to help companies avoid ACA reporting penalties. Our solution organizes the data you need and automatically populates 1094 and 1095 forms to prevent errors and make meeting deadlines easier. With our full-service option, you can receive support throughout the filing process. Our ACA Audit solution assists companies with their IRS penalties. Our ACA Audit determines your business's compliance by analyzing filing data and assessing liabilities and expected penalties. Find out how SyncStream's solutions could help you achieve ACA compliance by contacting us online today.
Employer Compliance and Reporting Requirements
Employers contend with various compliance requirements, including both EEO-1 and ACA reporting. The Affordable Care Act (ACA), also known as Obamacare, includes an employer mandate that sets reporting requirements for applicable large employers (ALEs) that employ 50 or more full-time equivalent employees using the 1094 and 1095-C forms. SyncStream's ACA software solutions help employers manage the compliance process by gathering accurate data, generating reports and e-filing with the Internal Revenue Service (IRS). Read more about our ACA software solutions below to decide which is best for you.
The Equal Employment Opportunity Commission (EEOC) requires employers that employ 100 or more employees to report on summary workforce data related to their employees gender, job category and ethnicity using the EEO-1 form on an annual basis. SyncStream's EEO software solutions help employers manage the diverse and sensitive data, as well as product an accurate final report that is ready for submission to the EEOC. Read more about our EEO software solutions below to decide which best suits your needs as an employer.
We have many ACA tracking software options available to aggregate data, file forms and remain in compliance. SyncStream's ACA reporting services include our ACA Dashboard, Reporting Essentials, and E-File Complete. We are now also happy to offer solutions for state ACA filings as well. Below is a chart that compares the functionality of each ACA solution.
ACA Dashboard is our most comprehensive ACA employer reporting software. It manages all the aspects of ACA reporting and compliance, even in the most complex employment cases. Its main features include:
- Employee tracking: Import payroll data and hours worked to determine full-time status
- Data archive: See all of your measurement data for your records to eliminate IRS penalties from Letter 226J
- Report generating and filing: Generate your annual IRS report, populate data for your B- and C-series reports and e-file right from our data solution
Choose this software if you want an all-in-one solution that will take care of every aspect of your Affordable Care Act compliance checklist.
ACA Reporting Essentials
ACA Reporting Essentials collects information about employer plans and coverage to populate IRS reports. Our solution features include:
- Aggregation: Gathers information about coverage and employees
- Integration: Integrate your benefits administration system or upload your coverage and plan information
- Population: Fill in data for employee statements and B- and C-series reports automatically
- Report generating and filing: Generate reporting codes and e-file with the IRS right from the interface
Choose this software if you already use an employee tracking solution and want assistance with IRS reporting.
ACA Audit ensures compliance and avoids non-compliance penalties. Its features include:
- Proprietary business logic: Run checks that flag potential penalties
- Calculations estimates: Estimate your 4980H(a) and 4980H(b) calculations
- Reports and collaterals: Generate your ACA liability assessment reports and response collaterals
Use this solution to control your business' Affordable Care Act compliance.
ACA E-file Complete
ACA E-file Complete helps your company file reports on time and stay compliant. Its features include:
- Population: Populate 1095-B and 1095-C forms
- Editing: Preview and edit your forms and make necessary corrections
- Filing: E-file from our solution interface and monitor your status or print and mail your forms
Choose this solution if you already have ACA tracking and reporting and want to e-file your reports.
Equal Employment Opportunity Commission (EEOC) Solutions
Our EEOC solution includes:
EEO-1 Comply software helps businesses collect data and generate necessary reports for compliance. It includes:
- Compliance documentation: Use employee data to create documentation for evidence of compliance
- Report generating: Generate your annual EEO-1 report and identify any missing crucial data items
- Workforce analytics: Analyze pay and hourly data to identify and correct any disparities
Choose this solution to ensure compliance with EEO-1 and receive assistance or complete service from a dedicated support team.
Contact SyncStream for Professional ACA Reporting Today
The ACA management tools from SyncStream help you avoid an ACA audit from the IRS and remain in compliance. Our team is here for you and ready to help with whatever you need.
Learn more about our reporting solutions today. Contact us online or call 877-291-9256.
State ACA Filings
One of the emerging trends we are seeing in the compliance arena is that States have begun to require their own ACA filings. States like New Jersey and California have already passed state level legislation that requires their residents to purchase healthcare coverage or pay a penalty. Along with this state level mandate comes a reporting requirement on the state level that mirrors the requirements of the Affordable Care Act. In fact, New Jersey has simply adopted the 1095-C form as the required form at the State level.
In 2020 both New Jersey and Washington D.C. are requiring employers that employ NJ and Washington D.C. residents to submit 1095-C forms to their state and district systems. New Jersey's deadline for this filing requirement is March 31st, and for D.C. the deadline is June 30th. SyncStream fully supports the electronic filing of these forms for both New Jersey and Washington D.C.. We fully intend on supporting California in 2021 and any other state that begins introducing state level filings! Read more below about all state level activity.
What Are the State ACA Filings?
The fee associated with the individual mandate of the ACA was repealed starting in 2019, removing the federal tax penalty for individuals choosing not to purchase health insurance. In response, some states issued their own mandates to continue requiring residents to obtain insurance.
New Jersey has passed the Health Insurance Market Preservation Act, which imposes an individual mandate requiring New Jersey residents to purchase healthcare coverage and report that to the state. In addition, employers must report and verify coverage that was offered to New Jersey residents. This means that applicable large employers (ALEs), defined the same as the in the Affordable Care Act (ACA), and all other providers of Minimum Essential Coverage (MEC) to New Jersey residents must send health-care coverage returns to the State for the 2019 Tax Year. New Jersey has clarified that employers will use the federal 1094 and 1095 B and C series forms to complete this filing requirement. Filing will be done on the State level through the same filing system employers use to file W-2 forms. SyncStream Solutions has been approved as a third party vendor to complete these filings on behalf of employers.
The District of Columbia's (D.C.) individual mandate requires residents to have qualifying coverage throughout 2019. In-state and out-of-state employers who withhold and pay payroll tax to D.C. or who employ D.C. residents, even if the employer does not withhold D.C. payroll taxes are subject to reporting. The reporting obligation is limited to Applicable Large Employers (ALEs). Employers who only have fully-insured coverage cannot rely on the insurer to provide 1095-B forms alone, they will still need to submit 1095-C and 1094-C forms to D.C. The first deadline for this reporting requirement is June 30th, 2020.
The State of California has also passed an individual mandate that requires residents to obtain qualifying coverage starting in 2020. In-state and out-of-state employers who employ California residents are obligated to file the same information found in the 1095 and 1094-C federal forms. Final details are not available, however it is anticipated that employers offering fully-insured coverage will rely on their insurance carrier to submit the data to the State, while employers offering self-insured coverage will submit their own data. The penalty for employers who fail to comply is $50 per individual not reported to the State. The first filing for employers will be due March 30, 2021.
The trend for States to implement their own individual mandate continues. Other states such as Rhode Island, Vermont and Massachusetts have taken some legislative steps towards this end.
Other states such as: Hawaii, Washington, Connecticut, Minnesota and Maryland are considering implementing an individual mandate along with an employer filing requirement.
Let SyncStream Take State-Specific Filings Off Your Hands
State filing requirements can increase your reporting workload significantly. At SyncStream, we support ACA filing in any state that introduces an individual mandate. When you let us handle your state-specific filings, you can benefit from:
- Simplified reporting:SyncStream's state filing solution consolidates the health care and employee demographic information you need and automatically populates the required forms. When you're done adding data, submit the forms electronically and wait for approval.
- Compliance documentation:Penalties for failing to meet state ACA filing requirements can be costly. In case of an audit, you need adequate documentation of your compliance with state mandates. SyncStream's cloud-based solution provides auditable documentation to keep your organization safe.
- Dedicated support:The dedicated support team at SyncStream will work with you throughout the filing process to answer your questions. We stay up to date on the latest health care regulations so you can focus on your other HR responsibilities.
Contact Us to Learn More Today
Meeting state ACA filing requirements doesn't have to be complicated. At SyncStream, we have a customer satisfaction rating above 95%. To find out how we could make your business's state filing process faster and more accurate, call 877-291-9256 or contact us online today.
SyncStream has been assisting employers to complete their ACA and EEOC compliance since 2013. We provide employers industry leading software and subject matter expertise. We have served over 10,000 employers in the Country and filed over 3.5 million forms with the government on behalf of employers. Our software is intuitive, integrated, and produces auditable and accurate outputs that protects an employer from noncompliance. We also provide world class customer service to help guide employers through the complex compliance landscape.
Benefits of SyncStream
Partnering with SyncStream for your ACA reporting offers many advantages over doing it yourself, including:
Our software solutions manage your data, generate reports and do other essential tasks automatically. On-time reporting saves you valuable time on the job and avoids penalties with the IRS.
Avoid Unwanted Filing Costs
There is no need to find a separate filing solution with SyncStream. Our software will directly e-file with the IRS for your convenience, helping your company avoid filing costs other companies impose.
Increase Efficiency and Focused Work
Instead of spending valuable business time doing ACA reporting, your employees can focus on other tasks. Our software solutions manage your reports, so your team can work elsewhere.
No Last Minute or Late Filings
The SyncStream reporting solutions will help you complete and file your reports well ahead of the deadlines. Your team can avoid the stress of short notice or late filing, and your company can avoid the hefty late fines.
Other benefits of choosing SyncStream include:
- Full Service Support
- State filings for New Jersey, Washington DC available
- State filing for California coming soon! (starting in 2021)
- Multi-year federal filings still available (2015 through 2020)
- Built in audit functionality
- Print to mail services
- Electronic filing directly to the Internal Revenue Service (IRS)
SyncStream Clears Your Filing Confusion
Companies need to follow the health insurance employer mandate to stay compliant. Simplify the process with the ACA compliance experts at SyncStream. We are here for our customers at every step of the process and are dedicated to helping you generate the reports you need to succeed.
What you don't know about your compliance solution can hurt you!
Many Affordable Care Act compliance solutions offered by our competitors are either light or lacking complex logic. They cannot handle the some of the more complex employer situations as well as the nuanced elements of the regulations. These situations include:
- Controlled and Affliated Groups
- Employees that work in multiple locations
- Educational organizations and breaks in service such as summer break
- Tracking FMLA breaks in service accurately
- The 13 week rehire rules
- Affordability Safe Harbor calculations
- Population of the 1095-C and 1094-C forms
Why do our competitors offer ACA Light solutions?
There are several reasons that these "light" solutions exist:
- Many believed (and still incorrectly do in some instances) that the ACA was/is going away. And why wouldn’t they? You had dozens of major political figures, including a new President, vowing to get rid of it.
- Because of this belief, many vendors and employers chose not to invest too much time or resources in their compliance or solution.
- Often times this resulted in buying a solution that appeared to “get the job done” without really kicking the tires.
- Penalty letters are now forcing employers to take a deeper look at their filings and that is why these issues are being exposed.
- Remember, penalty letters are coming out 2 years after a filling is completed, and in some instances, even longer.
- We are finding that this is the first time many employers have really ever deeply evaluated their solution or their filing. Many are not liking what they are finding under the hood.
Are you a victim of "ACA Light"?
When you go with SyncStream you know you are getting a quality, and accurate solution that you can rely on!
Contact us online or call 877-291-9256.