Key Steps to Ensure Your Business Meets ACA Compliance Requirements

The Affordable Care Act (ACA) presents significant compliance requirements for businesses, making it crucial for them to understand and adhere to these rules. Non-compliance can result in substantial penalties and disrupt business operations. 

To help you navigate this complex landscape, we’ll explore key steps to ensure your business meets ACA requirements effectively.

Understanding ACA Basics

Before diving into the specific steps for compliance, it’s essential to grasp the basics of the ACA. The ACA, made in 2010, aims to increase access to healthcare, boost the quality of care, and lower overall healthcare costs. For businesses, the ACA primarily affects those with 50 or more full-time employees, known as Applicable Large Employers (ALEs).

The ACA requires ALEs to provide health insurance that meets minimum essential coverage (MEC) and is affordable for their employees. Additionally, businesses must report the health coverage offered to their employees to the Internal Revenue Service (IRS) through specific forms.

Understanding these foundational elements is crucial, as they form the basis of all subsequent compliance activities. By familiarizing yourself with the ACA’s objectives and requirements, you’ll be better prepared to navigate the complexities of compliance.

Utilizing ACA Compliance Software

One of the most effective ways to manage ACA compliance is by leveraging technology. 1095 software is designed to streamline the reporting and administrative tasks associated with the ACA, making the compliance process more manageable and less time-consuming.

For example, the 1095EZ solution offers a simple, turn-key approach that integrates seamlessly with your existing systems. This software eliminates the need for complex installations or integrations, making it easier to ensure compliance.

1095 software assists in automating the collection and reporting of necessary data, reducing the likelihood of errors and ensuring that all information is accurately submitted to the IRS. The software also helps track employee eligibility and coverage, making it easier to manage compliance on an ongoing basis.

By using such technology, businesses can save time, reduce administrative burdens, and minimize the risk of non-compliance penalties. 

Determining Applicable Large Employer (ALE) Status

A critical step in ACA compliance is determining whether your business qualifies as an Applicable Large Employer (ALE). An ALE is defined as a business that has 50 or more full-time employees or full-time equivalents (FTEs) during the previous calendar year. It’s essential to calculate this accurately, as being classified as an ALE triggers specific compliance obligations.

To determine ALE status, count the number of full-time employees (those working 30 or more hours per week) and add the number of FTEs. FTEs are calculated by totaling the hours worked by part-time employees in a month and dividing by 120. If the sum of full-time employees and FTEs is 50 or more, your business is considered an ALE and must comply with ACA requirements.

Accurate determination of ALE status is crucial, as it affects your obligations to provide health insurance and report to the IRS. Misclassification can lead to penalties, so ensure you review your workforce numbers carefully and consult with a tax professional if needed.

Offering Minimum Essential Coverage

Once you’ve established your ALE status, the next step is to offer Minimum Essential Coverage (MEC) to your employees. MEC is the minimum level of health insurance coverage that meets ACA requirements. It includes various benefits such as preventive services, emergency services, hospitalization, and prescription drugs.

Providing MEC is essential to avoid penalties. Ensure that the health plans you offer meet these standards and provide comprehensive coverage to your employees. Work with insurance providers to select plans that are ACA-compliant and offer the necessary benefits. Furthermore, communicate with your employees to ensure they understand their coverage options and how they meet the ACA requirements.

By offering MEC, you not only comply with ACA regulations but also support the health and well-being of your employees, which can lead to increased productivity and job satisfaction.

Ensuring Affordability and Minimum Value

In addition to providing MEC, the ACA requires that the health insurance offered to employees be affordable and provide minimum value. Affordability is determined by the cost of the employee’s share of the premium for self-only coverage, which must not exceed a certain percentage of their household income. 

Minimum value means that the plan must cover at least 60% of the total allowed cost of benefits expected under the plan. It should also provide substantial coverage for inpatient hospitalization and physician services.

To ensure your health plans meet these criteria, review the plan details and costs carefully. Consider conducting a thorough analysis or consulting with an insurance broker or benefits advisor. They can help you evaluate whether your plans are both affordable and meet the minimum value standard.

By ensuring affordability and minimum value, you not only comply with ACA requirements but also make healthcare accessible to your employees, fostering a healthier and more motivated workforce.

Accurate Record-Keeping and Reporting

Accurate record-keeping and reporting are crucial aspects of ACA compliance. The ACA requires businesses to maintain detailed records of the health coverage offered to employees. These records must be accurate and readily available in case of an audit by the IRS or other regulatory bodies.

Start by organizing employee data, including names, Social Security numbers, and details about the health coverage offered. Maintain records of employee hours worked, as this information is essential for determining eligibility for health benefits. It’s also important to keep records of any communications with employees regarding their health coverage options and enrollment.

When it comes to reporting, businesses must file Forms 1094-C and 1095-C with the IRS. Form 1094-C is a transmittal form that provides a summary of the employer’s information, while Form 1095-C provides details about the health coverage offered to each employee. Accurate completion and timely submission of these forms are critical to avoid penalties.

Using a structured system or software for record-keeping can simplify the process and ensure that all necessary information is captured and organized efficiently. Regularly review and update records to reflect any changes in employee status or health coverage, ensuring that your data remains current and accurate.

Key Takeaway

Navigating ACA compliance is a continuous process that demands attention to detail, proactive management, and a commitment to staying informed.

By integrating these practices into your business operations, you can ensure that your compliance efforts are effective and sustainable. This not only helps you avoid penalties but also fosters a healthier, more productive workforce. 

Embracing the right tools and strategies will position your business to handle regulatory challenges confidently and efficiently.