Key points about ACA best practices:
- The ACA employer mandate requires certain employers to provide affordable health insurance to their full-time employees.
- Recent IRS announcements have placed stricter requirements on employers’ reporting this year.
- Leveraging ACA best practices can help you stay compliant while making the best benefits decisions for your business.
- Easily prepare for ACA reporting with our ACA Reporting Prep Checklist.
The Affordable Care Act (ACA), which aims to give more people access to affordable healthcare, appears to be here to stay. Earlier this year, the Supreme Court upheld the Act, and the Internal Revenue Service (IRS) announced additional employer requirements and penalties.
If your organization is required to file, you need to understand these changes and how they may affect you in order to stay compliant. While certain forms and requirements may change, general best practices can help you stay compliant from year to year.
If you want to learn more about ACA reporting specifically, check out our blog How to Prepare for ACA Reporting and Compliance. It covers:
- Relevant deadlines
- Differences between ACA forms
- Eligibility and how to determine if you have enough full-time equivalent employees
- Additional considerations
What’s Changed: Stricter ACA Penalties
Under the ACA, the IRS requires applicable large employers to gather and submit information regarding the employee healthcare coverage they offer each calendar year. There are two major changes to ACA reporting this year:
No statute of limitations for ACA penalties
A notice issued by the IRS states that there is no statute of limitations for an Employer Shared Responsibility Payment (ESRP). In essence, this means that your business may be penalized by the IRS for any year in which you did not complete your ACA reporting correctly, no matter how long it’s been since that inaccurate or incomplete report.
For example, let’s say your business did not comply with the ACA in 2019. In general, the IRS’s statute of limitations is 3 years. This means that they would have until 2022 to audit your business and issue a penalty for that 2019 report. Without a statute of limitations, though, the IRS can audit your 2019 reporting any year after 2019 and issue a penalty.
Good Faith Transition Relief expired
The Good Faith Transition Relief has expired as of 2021. Every year until now, the IRS would not assess penalties for misinformation or minor mistakes on reporting forms, being that the employer made “good faith” efforts. This policy is now outdated and no longer applies, creating serious financial burden for employers, being that a penalty for any mistake has potential to cost up to $560 per form.
Though this relief has been removed, employers still possess the option to have penalties waived if they demonstrate reasonable cause for the mistake. It is critical that employers thoroughly review reporting documents from now on.
ACA Best Practices for Applicable Employers
While the increased risk of penalties can be scary, there are several things you can do to stay one step ahead. If you’re required to file under the ACA employer mandate, a few best practices can help you stay compliant and decide the best course of action for your business each year. You can also leverage businesses like Sentric that provide comprehensive ACA services to ensure your reporting is accurate and compliant.
Consider your organization’s strategy and goals
First, decide if you’ll even offer affordable health insurance coverage as described under the ACA. Staying compliant is important, but you should also consider how the benefits you offer contribute to your organization’s overall strategy and goals. For instance, your company may be on a tight budget, and health coverage can be expensive. Paying the penalty fees for not offering coverage may be less expensive than offering health coverage itself.
However, you may also want to consider your strategy for recruiting and retaining talent. Benefits play a large role in many employees’ job decisions. If you decide not to offer affordable health insurance, will it impact your ability to attract and retain employees? Weigh the pros and cons of each choice before making a decision.
Update your data throughout the year
If you decide to offer affordable health coverage under the ACA, prepare for reporting. ACA reporting requires you to collect an assortment of employee data. Making sure this information is updated and accurate across all platforms throughout the year will make reporting easier. In each system, double check each employee’s:
- Social Security Number
- Date of birth
- Employment period
- Hours worked
You can simplify this process by consolidating your employee data. Instead of storing information across multiple systems, consider switching to an HRIS. HRIS solutions store all of your people data in one place, which means you only need to update and verify information once.
Track full-time employees
The number of full-time employees you have impacts various ACA requirements. For this reason, it’s important to keep an accurate record of how many you currently employ. Tracking your full-time employees will help you:
- Determine whether you’re an ALE or Aggregated Employer Group
- Offer Minimum Essential Coverage to the correct employees
- Identify employees that are missing offers of essential coverage
Typically, we think of full-time employees as those who work an average of 40 hours per week. However, a full-time employee for ACA purposes is someone who works an average of at least 30 hours per week.
Develop an employee communication plan
Your employees probably don’t track the latest ACA changes in the news or on the web. Instead, they rely on you to share any relevant information. Developing an employee communication and education plan will ensure your employees understand the ACA and how it may affect them individually.
A formal communication plan also gives you the opportunity to showcase the value of your benefits program and any other perks you offer. When employees understand their benefits, they’re more likely to take advantage of them. You’ll often see reduced absenteeism, increased retention, and other improvements as a result.
Remember that some states have their own ACA requirements that may differ from the Federal rules. Be sure to check all related legislation to ensure you stay compliant.
ACA Reporting Deadlines
If you’ve implemented these best practices and are ready to get started with your ACA reporting, the deadlines for this year are as follows:
The IRS has also issued an advance copy of proposed regulations for 2022-2023.
ACA Form Changes
The IRS has released the forms you will use to report for the 2022 year. There are no significant changes from the forms you may have used to report for the 2020 calendar year.
How SentricHR Helps
SentricHR’s all-in-one HR software and comprehensive ACA services help you manage complex ACA requirements throughout the year. SentricHR automatically captures benefit changes and calculates employee status and coverage so you stay compliant. At the end of each year, our experts also process, print, and file your ACA forms, making sure they’re accurate and complete before sending them to your employees and the IRS.
To learn more about how we can help, speak with one of our product experts! Download our ACA Reporting Prep Checklist to easily keep track of deadlines and everything else you need to prepare for ACA reporting this year.