ACA Penalties vs. Software Investment: What Costs More?

ACA Penalties vs. Software Investment: What Costs More?

For employers navigating the complexities of the Affordable Care Act (ACA), balancing compliance with costs can be a challenge. One of the key considerations is whether it’s more economical to face potential penalties for non-compliance or to invest in a software solution like ACA-Track to help with ACA reporting and tracking. This blog post will explore both sides of the equation, weighing the risks of non-compliance against the costs and benefits of implementing ACA compliance software.

Understanding the ACA and Its Penalties

The Affordable Care Act (ACA) mandates that Applicable Large Employers (ALEs) provide affordable health coverage to full-time employees, or face penalties if they don’t comply. The penalty system is designed to encourage companies to offer coverage to their employees and to report it accurately to the IRS.

Key Penalties for Non-Compliance:

• Employer Shared Responsibility Payment (ESRP): If an ALE fails to offer affordable and adequate health coverage to full-time employees, they could be subject to an ESRP. This penalty can be hefty:

  • $2,000 per full-time employee, excluding the first 30 employees, if the employer fails to offer coverage altogether.

  • $3,000 per full-time employee who receives a premium tax credit because the coverage offered was unaffordable or didn’t meet minimum value standards. However, this penalty is capped at $2,000 per full-time employee.

• Penalties for Late or Incorrect Filings: Employers must file Forms 1094-C and 1095-C, detailing the health insurance offers made to employees. Failing to file these forms on time or providing incorrect information can result in additional fines:

  • $50 per form if filed less than 30 days late.

  • $110 per form if filed more than 30 days late, up until August 1st.

  • $270 per form for filings after August 1st, with maximum penalties of up to $1,113,000.

These penalties can add up quickly, especially for large employers, and can far exceed the cost of compliance.

The Risk of IRS Penalty Letters (226-J)

In addition to the penalties mentioned above, employers may receive an IRS 226-J penalty letter if they fail to comply with ACA reporting requirements. This letter details the penalty amount and provides instructions on how to appeal or dispute the charges. The letter also contains crucial information regarding the employees who may have qualified for a premium tax credit, which could indicate the employer’s failure to provide affordable coverage.

The Cost of ACA Compliance Software: Is It Worth the Investment?

On the flip side, implementing ACA compliance software like ACA-Track can significantly reduce the risk of facing these penalties. ACA-Track offers a comprehensive solution to track employee hours, monitor eligibility, and generate ACA reporting forms with ease. Let’s break down the key features and benefits:

1. Tracking and Monitoring Employee Hours

ACA compliance requires precise tracking of employees’ hours, particularly for part-time and variable-hour workers. Failure to monitor these employees accurately can lead to penalties if they are deemed eligible for coverage but were not offered it. ACA-Track offers seamless integration with various payroll and HR systems, automatically collecting data on hours worked across multiple platforms—timekeeping, time clocks, and payroll systems.

2. Automated Reporting and Filing

ACA-Track simplifies the daunting task of filing the necessary forms with the IRS. The software automatically generates Forms 1094-C and 1095-C, which are required for ACA compliance. It also allows you to file these forms electronically, saving time and minimizing human error. The software also includes features for fixing any reporting errors, which helps avoid penalties for incorrect filings.

3. Compliance and Alerts

With ACA-Track, employers receive automatic alerts when an employee exceeds the eligibility threshold for health insurance coverage, or when key compliance dates approach. This helps employers stay ahead of the ACA requirements and avoid surprises that could lead to fines.

4. Secure, Cloud-Based Solution

Data security is a major concern when dealing with sensitive employee information. ACA-Track uses a secure cloud-based system that is certified under SSAE 16 standards and complies with SOC 2 Type 2. This ensures that your data is protected and meets regulatory standards.

5. Customizable Dashboard and User Interface

The software provides a customizable dashboard, making it easy for employers to access relevant ACA data in a way that suits their needs. Whether you need to track employee eligibility or generate detailed reports, ACA-Track offers a user-friendly interface that simplifies the process.

6. Cost-Effective Pricing Plans

ACA-Track offers flexible pricing plans that can scale to meet the needs of businesses of all sizes. The service includes access to a dedicated Client Success Advisor who ensures that your business stays compliant with ACA regulations. Compared to the potential costs of penalties, investing in ACA-Track is a fraction of the price and offers peace of mind.

Weighing the Costs: Penalties vs. Software Investment

When considering whether to invest in ACA compliance software or risk facing penalties, the numbers are clear. ACA penalties can be substantial, especially for large employers with many employees. For example, if a company fails to offer affordable coverage and is penalized for just 100 employees, the fine could amount to $2 million annually—far more than the cost of implementing ACA-Track.

In contrast, ACA-Track offers an affordable solution that streamlines tracking, reporting, and compliance. By reducing the risk of errors and penalties, ACA-Track can save businesses significant amounts in the long run, making it a wise investment for employers who want to stay compliant with the ACA without the headache of managing it manually.

Conclusion

The decision between risking ACA penalties or investing in software like ACA-Track is a clear one for most employers. The cost of non-compliance can quickly add up, while the cost of ACA compliance software is a manageable expense that offers peace of mind and ensures your company remains compliant with ACA regulations. With features like automated reporting, error correction, and seamless integration with existing HR and payroll systems, ACA-Track offers a comprehensive solution that can save both time and money.

Don’t wait until you receive an IRS penalty letter—consider investing in ACA compliance software today to avoid penalties and ensure your business remains ACA-compliant.

For more information on how ACA-Track can help your business stay compliant with the ACA, visit their website at ACA-Track.