What is the ACA Mandate for Large Employers? A Comprehensive Guide for Businesses
The Affordable Care Act (ACA) has brought significant changes to how employers provide health insurance and report coverage to the IRS. For many organizations, especially larger employers, understanding and complying with the ACA mandate can be complex and time-consuming. In this detailed guide, we’ll explore what the ACA mandate means for large employers, who qualifies as a large employer, what their obligations are, and how solutions like ACA-Track can simplify compliance.
Understanding the ACA Mandate for Large Employers
What is the ACA Mandate?
The ACA mandate, often referred to as the Employer Shared Responsibility Provisions or Section 4980H of the Internal Revenue Code, requires applicable large employers (ALEs) to offer affordable health insurance that provides minimum value to their full-time employees and their dependents. If an ALE fails to do this, it risks paying penalties to the IRS, especially if any full-time employee obtains a premium tax credit by purchasing individual coverage through the Health Insurance Marketplace.
Who is Considered a Large Employer (ALE)?
An employer is classified as an Applicable Large Employer (ALE) if it employs 50 or more full-time employees or full-time equivalent (FTE) employees. The total count includes:
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Full-time employees (working 30 hours or more per week or 130 hours per month), and
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Part-time employees aggregated into FTEs based on their hours worked.
Example:
If a company has 40 full-time employees and 20 part-time employees each working 60 hours monthly, it calculates FTEs by dividing total part-time hours by 120 (the ACA’s full-time hour equivalent). In this example:
20 part-time employees x 60 hours = 1,200 hours ÷ 120 = 10 FTEs
Total employees = 40 full-time + 10 FTEs = 50 ALE status triggered.
Why is Tracking Hours Important?
Tracking actual hours worked by part-time and variable hour employees is essential because it helps employers:
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Determine if employees meet the ACA’s full-time threshold (30 hours per week or 130 hours per month),
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Identify who should be offered coverage,
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Avoid costly penalties by documenting eligibility accurately.
Failing to track hours may lead to assumptions that an employee qualifies for Marketplace subsidies, exposing employers to potential shared responsibility payments.
What are the Reporting Responsibilities?
ALEs must file:
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Form 1094-C: A transmittal form summarizing health insurance offer and coverage information,
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Form 1095-C: A detailed statement given to employees outlining the coverage offered.
These forms help the IRS determine if the employer has met ACA obligations or owes a penalty.
What Happens if an Employer Does Not Comply?
Penalties for non-compliance can be severe. For example:
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Late or inaccurate filing of ACA returns can incur penalties starting at $50 per return,
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Failing to offer affordable coverage can result in shared responsibility payments up to $2,000 per full-time employee (excluding the first 30),
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Employers may receive IRS penalty notices like the Letter 226-J, demanding responses and potentially significant fines.
Simplify ACA Compliance with ACA-Track
Given the complexity of ACA requirements, many employers turn to trusted third-party solutions to manage compliance accurately and efficiently. One such solution is ACA-Track, a cloud-based software platform designed specifically to meet all your ACA tracking, reporting, and compliance needs.
Why Choose ACA-Track?
ACA-Track helps you collect, monitor, and report ACA-related data effortlessly:
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Collect: Tracks actual hours worked across all employee types, including full-time, part-time, variable-hour, paraprofessional, and substitutes, integrating seamlessly with payroll, HRIS, timekeeping, and other systems.
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Monitor: Automatically monitors employee eligibility thresholds and sends alerts for key events like leaves and waivers.
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Report: Generates and files accurate 1094-C and 1095-C reports for federal and state compliance, including electronic IRS filing of XML data files.
Key Features of ACA-Track
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ACA 1095-C Monthly Line Code Audits: Ensures your monthly employee data is accurate.
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Variable Hour Tracking: Captures nuanced employee hour data to identify full-time equivalents correctly.
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User-Friendly Interface: Customizable dashboards and snapshot summaries make data easy to view and manage.
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Data Security: SOC 2 type 2 compliant, encrypted data storage, and secure data transfers ensure privacy.
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Dedicated Client Success Advisor: Personalized support to guide you through ACA compliance.
How ACA-Track Supports Your Organization
ACA compliance requires coordination across benefits, payroll, finance, and HR departments. ACA-Track consolidates this multi-source data into one secure system, simplifying:
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Data collection from multiple departments,
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Accurate calculation of measurement and stability periods,
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Timely preparation and electronic submission of ACA forms,
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Rapid retrieval of compliance data in case of IRS audits.
Final Thoughts
The ACA mandate for large employers is a critical legal obligation that requires careful tracking of employee hours, offers of coverage, and precise reporting to the IRS. With the risk of significant penalties for non-compliance, large employers must adopt a comprehensive compliance strategy.
Using a reliable, proven solution like ACA-Track empowers your business to meet ACA requirements confidently and efficiently, saving time, reducing risk, and providing peace of mind.
Ready to simplify your ACA compliance? Visit ACA-Track today and discover how their customizable, secure, and user-friendly platform can help your organization stay compliant and avoid costly penalties.
