Why is ACA compliance complicated during mergers and acquisitions?

Mergers and acquisitions combine two or more workforces, which can alter the Applicable Large Employer (ALE) status due to increased employee counts. Different legacy payroll and HR systems, varied measurement periods, and fluctuating employee statuses create complexity in tracking hours worked, eligibility, and coverage offers, making ACA compliance more challenging.

How does ACA-Track help with ACA compliance during mergers and acquisitions?

ACA-Track consolidates employee hours and eligibility data from multiple payroll and timekeeping systems into a single platform. It automates tracking for full-time, part-time, and variable-hour employees, aligns measurement and stability periods, and generates IRS-compliant forms 1094-C and 1095-C with built-in error checks, simplifying ACA compliance throughout the M&A process.

What are the risks of non-compliance with ACA rules in an M&A scenario?

Non-compliance can lead to significant IRS penalties, including shared responsibility payments if coverage is not offered or is unaffordable. Errors in reporting or failure to track employee hours accurately may result in costly 226-J penalty letters from the IRS, which require prompt and detailed responses.

What data should be tracked and integrated during ACA compliance after a merger or acquisition?

Employers must track actual hours worked for all employee types, monitor eligibility events like waivers and leaves, and maintain consistent records of hire and termination dates, coverage offers, and enrollment status. ACA-Track integrates this data from multiple legacy systems to maintain full compliance.

Can ACA-Track assist with ACA reporting deadlines and electronic IRS filings during M&A?

Yes, ACA-Track helps ensure timely delivery of Forms 1095-C to employees and electronic submission of Forms 1094-C and 1095-C to the IRS, including obtaining and managing the Transmitter Control Code (TCC) if required. It also supports error correction to reduce the risk of late filings or penalties.

Managing ACA Requirements in Mergers & Acquisitions Made Easy

How to Handle ACA for Mergers and Acquisitions: A Comprehensive Guide with ACA-Track

Navigating the Affordable Care Act (ACA) compliance during mergers and acquisitions (M&A) can be complex and fraught with risks. Companies must carefully manage employee health coverage obligations, tracking, and reporting to avoid penalties and ensure smooth integration of workforces. In this detailed blog post, we’ll walk you through key ACA considerations during M&A, and introduce how ACA-Track — a proven ACA compliance solution — can simplify your journey.

Understanding ACA Compliance in the Context of Mergers & Acquisitions

The Affordable Care Act (ACA) imposes specific employer responsibilities under Section 4980H of the Internal Revenue Code, primarily on Applicable Large Employers (ALEs) — those with 50 or more full-time and full-time equivalent employees. These ALEs must offer “affordable” health coverage that meets minimum value standards to their full-time employees or face potential penalties.

In a merger or acquisition, the definition of ALE status can shift drastically due to combined employee counts. Moreover, tracking full-time, part-time, and variable-hour employees across different legacy systems adds complexity, requiring precise and compliant monitoring.

Key ACA Challenges in Mergers & Acquisitions

Determining ALE Status Post-Merger
When two companies merge, the combined workforce determines the new ALE status. This means part-time employees of each legacy company might collectively push the new entity over the 50-employee threshold. Careful aggregation and calculation of full-time equivalent employees (FTEs) are critical to determine ACA obligations.
Employee Hours Tracking Across Multiple Systems
Legacy companies often use different payroll, HRIS, or timekeeping systems. Consolidating hours worked data is essential for proper ACA measurement and stability periods, especially for variable-hour employees whose coverage eligibility must be monitored accurately.
Aligning Measurement, Administrative, and Stability Periods
Each company may have different ACA measurement and stability periods. Post-merger, harmonizing these periods is necessary to maintain compliance and avoid coverage gaps or erroneous reporting.
Data Integration and Reporting
ACA reporting involves filing Forms 1094-C and 1095-C with the IRS and providing employee copies. Accurate and consistent data aggregation from both companies is essential to prevent errors that can trigger IRS penalties.
Addressing ACA Penalties and Shared Responsibility Payments
Failure to comply can lead to substantial IRS penalty letters such as the 226-J notice. Proper compliance tracking and reporting during M&A can mitigate the risk of costly assessments.

How ACA-Track Simplifies ACA Compliance in Mergers & Acquisitions

Handling ACA requirements during mergers or acquisitions requires a comprehensive, integrated solution. That’s where ACA-Track comes in as a trusted partner:

1. Seamless Data Collection from Multiple Systems

ACA-Track collects employee hours worked from all employee types and from multiple legacy systems — timekeeping, payroll, mobile entry, manual timesheets — consolidating into a single platform. This makes it easier to track variable-hour and part-time employees during measurement periods accurately.

2. Monitoring and Alerts for Eligibility

With ACA-Track’s advanced monitoring tools, you get proactive alerts when employees exceed ACA eligibility thresholds or events such as waivers or leaves occur. This feature is especially valuable during workforce transitions in M&A where employee statuses fluctuate.

3. Flexible Configuration to Align Measurement Periods

ACA-Track allows you to customize measurement, administrative, and stability periods. This flexibility enables your merged organization to align ACA compliance rules smoothly across the combined employee population.

4. Comprehensive ACA Reporting with Confidence

Generate and file accurate IRS Forms 1094-C and 1095-C electronically. ACA-Track supports electronic XML filing with the IRS and offers thorough audits to identify and fix errors before submission — vital for avoiding penalties post-M&A.

5. Dedicated Client Success Advisors

ACA-Track assigns a dedicated Client Success Advisor to help you navigate compliance complexities during mergers and acquisitions, making the process straightforward and less stressful.

ACA-Track Features That Support M&A ACA Compliance

Customizable Dashboard: See key ACA metrics at a glance and tailor your view to focus on relevant merger-related data points.
Snapshot Summaries: Maintain employee ACA data views over time, preserving historic payroll and insurance status snapshots from each legacy company.
User-Friendly Interface: Quickly filter and drill down into subsets of employees by location, ACA status, or full-time/part-time classification.
Secure Cloud Platform: ACA-Track is SOC 2 Type 2 compliant with encrypted data storage and secure HTTPS transfers, safeguarding sensitive employee information through the transition.

Practical Steps for Managing ACA During M&A

Step 1: Conduct a Workforce Analysis
Combine headcounts and calculate full-time and full-time equivalent employees across the merged companies to confirm ALE status.

Step 2: Align ACA Policies and Periods
Decide on unified measurement, administrative, and stability periods post-merger for consistency.

Step 3: Consolidate Data Systems or Use ACA-Track Integration
Whether you consolidate payroll/HRIS systems or maintain legacy systems, ACA-Track integrates seamlessly with multiple platforms to centralize data.

Step 4: Track Variable Hour and Part-Time Employees Closely
Ensure accurate hours tracking to avoid misclassification and penalties.

Step 5: Prepare Accurate Reporting
Leverage ACA-Track’s reporting and audit tools to file timely, error-free IRS forms and distribute 1095-C forms to employees.

Step 6: Monitor Post-Merger Compliance and Penalty Risk
Use ACA-Track’s error alerts and data monitoring to catch compliance gaps early and avoid IRS penalty letters.

Why Choose ACA-Track for Your ACA Compliance in M&A?

Handling ACA compliance during mergers and acquisitions is a significant challenge that requires accuracy, flexibility, and expert support. ACA-Track offers a complete solution designed to:

Handle complex employee hour tracking and eligibility calculations
Integrate multiple payroll and HRIS data sources seamlessly
Provide comprehensive, IRS-ready reporting with error correction tools
Deliver secure, cloud-based data management
Support your team with dedicated advisors experienced in ACA compliance

By partnering with ACA-Track, you can approach ACA compliance during your merger or acquisition with confidence and ease.

Final Thoughts

Mergers and acquisitions inherently complicate ACA compliance due to workforce integration, system consolidation, and regulatory requirements. Without proper attention, your company risks costly penalties and IRS audits. ACA-Track’s data-driven platform and expert services can streamline ACA tracking, reporting, and compliance — enabling your organization to focus on the bigger picture of successful business integration.

Explore more and get started with confidence by visiting ACA-Track.

If you’re involved in an M&A and want to make ACA compliance one less thing to worry about, ACA-Track is your go-to partner for accurate, reliable ACA management.