Is ACA Compliance Top of Mind Before You Receive an IRS Notice?

Decorative image: businessman reading penalty notice letter

No company wants to receive an ACA (Affordable Care Act) penalty notice from the IRS. There are some key questions you can ask yourself when you sit down to work out the details of the health plan(s) you will offer your employees for the upcoming plan year. Your answers to these questions could save you a hefty penalty two years down the road.

It's January, and you're preparing last year's Employer-Provided Health Insurance Offer and Coverage Forms (1095-C Forms), which you must file with the Internal Revenue Service (IRS) soon. Oh no … you realize line 16 for several employees is blank. What happened? What does it mean? It means they did not enroll in your coverage, and no other relief code applies to shield you from penalties.

Or what if you've been filing your Forms 1094-C/1095-C each year by March 31 and, suddenly, the dreaded envelope arrives from the IRS? The notice states you have a potential ACA penalty because you failed to offer your full-time employees affordable, minimum value, minimum essential coverage.

Waiting until you're ready to file your employees' Forms 1095-C isn't the ideal time to ensure you're offering the right coverage and meeting ACA requirements. The best time to address this was before your employees enrolled in coverage two years ago.

What triggers these penalties?

Penalties are triggered when one or more of your full-time employees gets a subsidy toward Marketplace coverage. This occurs when the Marketplace determines they did not have an offer of employer-sponsored coverage that meets all of the ACA requirements – plans that are affordable and offer minimum value minimum essential coverage — when they were eligible to enroll.

After you file the prior year's forms with the IRS each March, it takes the IRS several months to compile all of that data, along with other information it receives from individual tax filings, to determine if employers may be liable for employer-shared responsibility penalties. By the time penalty notices are circulating, a lot of time has elapsed, and it's too late to go back and change anything.

Keeping ACA compliance top of mind all the time

When is the right time to ensure you aren't in this predicament? When you are sitting down to work out the details of the health plan(s) you'll offer employees for the upcoming plan year. Is ACA compliance top of mind during this key timeframe?

Here are some questions to think about:

  • Are you set up to offer minimum essential coverage to at least 95% of full-time employees and their dependents each month?
  • Are you certain that the plans you offer include preventive services and any state-mandated benefits?
  • Do the plans comply with ACA legal requirements to include coverage for pre-existing conditions, no annual/lifetime maximums on essential health benefits, and the right to choose a primary care physician (PCP)?
  • Does the plan(s) meet the ACA minimum value standard?
  • Is the coverage affordable for full-time employees who are, or may become, eligible for an offer of coverage? And is it based on the Federal Poverty Level, Rate of Pay, or box 1 W-2 wages safe harbor?
  • Where can you find this information to set yourself up for compliance success?

Being proactive is the optimal way to help ensure sure you're not faced with an IRS penalty notice for noncompliance with the ACA employer mandate. Employers who work with an experienced service provider are using the most effective risk management strategy. To successfully navigate risk, employers must identify ways to gain insight into and assess that risk. Without awareness of the exposure to risk, it is challenging to deploy a proactive approach to penalty avoidance.

For more information about the ACA and penalty avoidance, download: .