ACA Compliance Guide: Reporting, Penalties & Requirements | solveHR

Is your business ACA compliant? Avoid these costly fines

Staying compliant with the Affordable Care Act (ACA) is about more than just checking a box on a legal form. For growing businesses, it is a critical financial safeguard. One missed deadline or calculation error can lead to significant IRS penalties that impact your bottom line.

Whether your company is expanding, restructuring, or just trying to keep up with annual regulatory changes, understanding your obligations is essential. This guide breaks down exactly what employers need to know about ACA compliance, reporting requirements, and how to protect your organization from unnecessary risk.

Who must comply? Understanding ALEs

The first step in compliance is determining if the ACA mandates apply to your specific business. The regulations primarily target Applicable Large Employers (ALEs).

You are considered an ALE if your company employed an average of 50 or more full-time employees (including full-time equivalent employees) during the previous calendar year.

It is important to note that "full-time equivalent" (FTE) calculations combine the hours of part-time workers to see if they equal full-time positions. If your workforce meets this threshold, you become subject to the Employer Shared Responsibility Provision, often called the "employer mandate."

Core compliance requirements

Once you are identified as an ALE, you must meet specific standards to avoid fines.

Offering coverage

ALEs are required to offer minimum essential coverage to at least 95% of their full-time employees and their dependents. Failing to meet this specific percentage can trigger substantial penalties across your entire workforce.

Affordability and minimum value

Simply offering a plan isn't enough; the coverage must be high-quality and affordable.

• Affordability: The employee’s share of the premium for self-only coverage must not exceed a specific percentage of their household income (adjusted annually).
• Minimum Value: The plan must cover at least 60% of the total allowed cost of medical services and include coverage for physician and inpatient hospital services.

Mastering ACA reporting: Forms 1094-C and 1095-C

Documentation is just as important as the coverage itself. The IRS requires ALEs to prove they are compliant by filing specific information returns annually.

• Form 1095-C: This form must be provided to every full-time employee. It outlines the health coverage offered to them month-by-month, including the cost of the lowest-premium plan.
• Form 1094-C: This is the transmittal form filed with the IRS. It acts as a summary cover sheet for all the 1095-C forms you submit, confirming your status as an ALE.

Meeting the ACA reporting deadlines is crucial. Late or inaccurate filings can result in separate penalties, even if you offered the correct insurance.

The cost of non-compliance

The IRS takes ACA enforcement seriously, and the fines for non-compliance can be steep. These penalties generally fall into two categories, often referred to informally as the "sledgehammer" and the "tack hammer."

The "Sledgehammer" Penalty

This applies if you fail to offer minimum essential coverage to at least 95% of your full-time employees, and at least one employee receives a premium tax credit on the Marketplace. This penalty is calculated based on your total number of full-time employees, meaning the costs can accumulate rapidly.

The "Tack Hammer" Penalty

This applies if you offer coverage, but it is either unaffordable or does not provide minimum value. This fine is triggered for each specific employee who turns down your offer and receives a tax credit on the Marketplace.

Common pitfalls to watch for

Even well-intentioned businesses can fall behind on compliance. We often see companies struggle due to:

• Rapid growth: Crossing the 50-employee threshold mid-year without realizing it.
• Variable hours: Failing to accurately track hours for employees with fluctuating schedules.
• Misclassification: Incorrectly categorizing workers as independent contractors rather than employees.

Simplify compliance with solveHR

Navigating the complexities of the ACA—from tracking eligibility to managing 1095 C form distribution—requires time and expertise. You shouldn't have to manage this burden alone.

solveHR provides comprehensive support to ensure your business meets every requirement. We help you track employee hours, manage benefits that meet affordability standards, and handle the complex filing of IRS forms. By partnering with us, you reduce your administrative workload and minimize the risk of costly penalties, allowing you to focus on growing your business.

Partnering for peace of mind

ACA compliance is a moving target, with penalty amounts and regulations often shifting annually. Don't let a paperwork error become a financial liability.

solveHR seamlessly integrates into your team to provide the expertise and tools necessary to keep your business protected. Contact us today to streamline your HR processes and ensure you remain compliant year-round.

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