How to Conduct an Internal ACA Audit: A Comprehensive Guide with ACA-Track
The Affordable Care Act (ACA) has brought significant compliance responsibilities for Applicable Large Employers (ALEs). Conducting an internal ACA audit is essential for ensuring your company meets these complex requirements, avoiding costly penalties, and streamlining reporting processes. If you’re looking for a way to confidently manage ACA compliance, ACA-Track offers a proven solution to simplify the audit and reporting process.
In this blog post, we’ll guide you step-by-step on how to conduct an internal ACA audit, drawing on best practices and showcasing how ACA-Track’s tools and services can be a game changer for your business.
Why Conduct an Internal ACA Audit?
An internal ACA audit helps your organization:
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Ensure accurate tracking of employee hours, especially for part-time and variable-hour employees.
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Verify compliance with ACA offer and coverage requirements.
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Detect and correct errors in ACA reporting before IRS submission.
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Prepare for potential IRS audits with comprehensive documentation.
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Avoid penalties stemming from noncompliance or late filings.
Step 1: Understand ACA Basics and Your Obligations
Before you start auditing, it’s vital to understand key ACA concepts:
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Applicable Large Employers (ALEs): Generally, employers with 50 or more full-time and full-time equivalent (FTE) employees.
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Full-Time Employees: Individuals working 30+ hours per week on average, or 130+ hours per month.
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Measurement Period: Timeframe to measure employee hours for determining full-time status.
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Stability Period: When employees classified as full-time must be offered health coverage.
You must track actual hours worked by all employees, including part-time, variable-hour, and substitutes, as this data is crucial in determining ACA eligibility.
Step 2: Gather Comprehensive Data Across Departments
ACA compliance requires data integration from multiple sources:
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Payroll Systems: Employee hours, wages, and classifications.
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Human Resources: Hire dates, terminations, employee status changes.
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Benefits Administration: Health insurance offer and enrollment data.
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Timekeeping Systems: Actual hours worked including clock-in/clock-out records.
This multi-departmental coordination is key to ensuring your audit has a complete and accurate dataset.
Step 3: Use a Reliable ACA Compliance Solution — ACA-Track
Manual audits can be overwhelming. This is where ACA-Track shines. ACA-Track provides:
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Complete Data Integration: Collects employee hours from payroll, timekeeping, mobile entries, and manual timesheets.
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Employee Eligibility Monitoring: Alerts you when eligibility thresholds are met or exceeded.
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Customizable Dashboards: View data how you want it, with filtering, sorting, and color-coded warnings.
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Snap Shot Summaries: Maintain views of employee data over time, preserving historical payroll and insurance status.
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Secure Cloud-Based Platform: Encrypted data transfers and SOC 2 compliance ensure data privacy and security.
ACA-Track helps you efficiently monitor all employee hours worked and eligibility status, which is critical for an internal audit.
Step 4: Verify Hours Worked and Eligibility Calculations
Using your collected data, verify:
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Part-Time and Variable Hour Tracking: Confirm the average weekly/monthly hours fall below or above the 30-hour threshold.
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Full-Time Equivalents (FTE) Calculations: Aggregate non-full-time employee hours correctly, not exceeding 120 hours per employee for calculation purposes.
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Measurement & Stability Periods: Ensure these are configured correctly to capture accurate eligibility windows.
ACA-Track’s built-in calculations and configurable measurement periods make this step straightforward and less error-prone.
Step 5: Review ACA Offer and Coverage Data
An internal audit must include a thorough review of:
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Health insurance offers made to full-time employees and their dependents.
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Documentation of waivers and employee refusals.
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Affordable and minimum value coverage standards compliance.
Your audit should cross-reference employee eligibility with offer records, ensuring no eligible employee was missed.
Step 6: Perform a 1094-C and 1095-C Data Audit
Accuracy in Forms 1094-C and 1095-C is crucial for IRS reporting:
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Validate Employee Information: Names, Social Security numbers, and dates must be correct.
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Check Codes and Coverage Information: Confirm the accuracy of monthly offer of coverage codes and safe harbor affordability codes.
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Detect Reporting Errors: Look for missing or inconsistent data.
ACA-Track offers monthly line code audits and can electronically file your ACA XML files directly with the IRS, significantly reducing reporting errors.
Step 7: Prepare for IRS Submission and Potential Corrections
If your company has more than 250 employees, electronic filing is mandatory. Ensure you:
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Obtain or renew your IRS Transmitter Control Code (TCC).
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Test your ACA data files against IRS schemas.
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Maintain records of all submissions and corrections.
ACA-Track not only facilitates seamless IRS reporting but also helps you fix ACA reporting errors efficiently if the IRS sends penalty notices, such as the dreaded 226-J letter.
Step 8: Document Findings and Plan Next Steps
Your internal audit report should include:
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Summary of compliance findings.
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Corrective actions for any data gaps or errors.
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Recommendations for ongoing monitoring and data integration improvements.
Leverage ACA-Track’s detailed reports and client success advisors for expert guidance on maintaining compliance year-round.
Why Choose ACA-Track for Your Internal ACA Audit?
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All-in-One Platform: Collect, monitor, and report all ACA data seamlessly.
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Dedicated Client Success Advisors: Personalized support to make ACA compliance easy.
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Flexible Pricing Plans: Tailored to the size and needs of your business or clients.
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Trusted Security: SAS 70 and SOC 2 Type 2 certified cloud data center.
For employers looking to confidently manage ACA compliance and conduct internal audits with less stress and more accuracy, ACA-Track offers a comprehensive, user-friendly solution.
Final Thoughts
An internal ACA audit is not just a best practice — it’s essential to avoid costly penalties and ensure smooth ACA reporting. By understanding your obligations, gathering accurate data, and leveraging robust tools like ACA-Track, your organization can simplify the compliance process and face IRS audits with confidence.
Start your internal ACA audit today with the proven tools and expert support from ACA-Track.
