1. Does ACA Reporting still exists?
Yes, according to the Affordable Care Act, ACA reporting has been required since 2015 for any employer over a 100 FTEs. The next year it was lowered to the now existing threshold for ALEs of employers with 50 or more FTEs or any size employer offering a self-funded group health plan.
The safe harbors that existed in early ACA reporting days are long gone. Did you know that if you are a Large Employer that has not reported at all since 2015, there is still an opportunity to correct that prior to the IRS J notice showing up at your doorstep?
The original intent of the ACA was to encourage employers to offer affordable health insurance coverage to eligible employees. ALEs are required to offer affordable health insurance coverage that provides both minimum essential coverage (MEC) and minimum value (MV).
Large Employers and ICHRA
While the mandate and intention are for large employers to provide affordable insurance to their employees, due to cost barriers some employers simply can’t afford to offer affordable ACA Metal Plan insurance to their full-time employees. Regardless of the employers’ budget and offers of coverage, those businesses considered ALEs must report on no offers of coverage, offers of coverage of ICHRA or MEC, and/or full affordable offers of coverage to the IRS on 1095s.
2. So only large employers need to do ACA reporting?
This is not necessarily the case. All large employers must report no matter if they offer coverage or not and some small (under 50 FTE) employers will have to report based on the type of Group Health plan they provide their employees.
3. How do I know if I need to do ACA Reporting?
Step one is to determine what category of employer you are.
- Do not need to report: Employers with less than 50 FTE in the prior calendar year that offer a fully insured (traditional) group health plan or do not offer group health plan at all.
- Small Group: Employers that are not ALEs (applicable large employers) offering self-insured group health plans, Level-funded group health plans or ICHRA plans. These groups must file with the IRS ACA reporting with type “B” Forms. Including filing 1094-B and 1095-B Forms: https://www.irs.gov/pub/irs-pdf/i109495b.pdf.
- Large Group: Any employer that averages over 50 FTES (full time equivalents) for the previous calendar year is considered an ALE (Applicable Large Employer) for the current calendar year. ALEs are required to offer affordable health insurance that provides both minimum essential coverage and minimum value to 95% of their full-time employees. These groups must file with the IRS 1094-C and 1095-C Forms and their employees https://www.irs.gov/pub/irs-pdf/i109495c.pdf
4. How do I know if I’m an ALE?
Example of Applicable Large Employer (ALE) Determination
Determining if you are an ALE is a bit more complex than counting to 50 full-time employees each month for a year. For example:
Widget Manufacturing has 40 full-time employees for each calendar month during 2022.
Widget Manufacturing also has 20 part-time employees for each calendar month during 2022, each of whom has 60 hours of service per month.
Widget Manufacturing must calculate the hours of service of the part-time employees for a month total of 1,200 [20 x 60 = 1,200].
They then take this number and divide it by the combined hours of service of the part-time employees by 120 equals 10 [1,200 / 120 = 10]. This number, 10, represents the number of Widget Manufacturing full-time equivalent employees for each month during 2022.
They then add up the total number of full-time employees for each calendar month of 2022, which is 480 [40 x 12 = 480].
Then take the total number of full-time equivalent employees for each calendar month of 2022, which is 120 [10 x 12 = 120].
Widget Manufacturing adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
Conclusion: So, although Widget Manufacturing only has 40 full-time employees, it is an ALE for 2023 due to the hours of service of its full-time equivalent employees.
If you would like help, Flyte’s ACAPrime has a service that can determine your ALE status. Below is some of the information we would need:
- Transactional payroll records organized in a table or matrix (e.g. Excel Spreadsheet) with clearly labeled columns showing all applicable hours by employee by month or by pay period for the prior calendar year.
- Each employee row should at least display EE Name or Identifier / Date Range or Month / Total Hours worked.
- (Optional) Employee Counts by month for 2022 for any employees that are not represented in the hourly data.
5. What could be some of the penalties employers would face for not reporting?
2023 Penalties for Non-Compliance in the above reporting with an example of a company with 80 1095s to file.
$290 per form if you fail to file a correct return with the IRS x 80 = $23,200
$290 per form if you fail to file a correct payee statement with the IRS x 80 = $23,200
$290 per form for failure to file electronically with the IRS x 80 = $23,200
If an employer has 80 1095 forms to file and does not file them correctly with the IRS this results in a $69,600 fine for the filing year.
Flyte’s ACAprime team is ready to help with your ACA tracking, employee eligibility tracking, ALE status or ACA Reporting needs. Contact us today to learn more.
Part two in a three-part series on navigating ICHRAs for Applicable Large Employers.
