What Legal Teams Should Know About ACA Reporting
Navigating the complex landscape of Affordable Care Act (ACA) compliance can be daunting, especially when it comes to reporting obligations. For legal teams in organizations of all sizes, understanding the ins and outs of ACA reporting is crucial in avoiding hefty fines and penalties. Here’s a detailed guide to what legal teams should know about ACA reporting and how a solution like ACA-Track can simplify this task.
What Is ACA Reporting and Why Does It Matter?
ACA reporting is a requirement for applicable large employers (ALEs), defined as those with 50 or more full-time equivalent (FTE) employees. This process involves reporting health coverage offerings to both employees and the IRS to demonstrate compliance with the ACA’s employer shared responsibility provisions.
The core forms involved in ACA reporting are:
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Form 1095-C: Details whether the employer offered health insurance to full-time employees, and if so, the specifics of the coverage.
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Form 1094-C: Transmittal form that summarizes the data reported on the 1095-C forms.
Failure to comply with ACA reporting can lead to significant penalties, including fines for not offering coverage, or for offering coverage that is not “affordable” or doesn’t meet “minimum value” standards.
How Does ACA-Track Help with ACA Compliance?
Ensuring accurate and timely ACA reporting requires the collection of a large amount of data, often from disparate sources like payroll systems, HR information systems, and benefits records. This is where ACA-Track comes into play.
Data Collection Made Simple
ACA-Track helps employers collect hours worked for all employee types, including variable-hour, full-time, part-time, and even temporary or substitute workers. This includes data integration from various sources like:
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Timekeeping systems
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Manual time sheets
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Automated time clocks
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Payroll systems
This makes tracking employee eligibility for health coverage seamless. With a full picture of hours worked, ACA-Track ensures no employee is overlooked, especially those with variable hours, reducing the risk of penalties.
Monitoring Employee Eligibility
The ACA requires employers to track the eligibility of full-time employees based on their hours worked during the measurement period (typically 3-12 months). ACA-Track keeps tabs on employee hours, providing alerts when eligibility thresholds are exceeded, so employers can take timely action.
This is especially important for organizations that employ variable-hour employees, as failing to track their hours accurately can lead to mistakes that expose the organization to IRS penalties.
Streamlined Reporting Process
Once the data is collected and eligibility is tracked, ACA-Track helps employers generate the required reports:
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Form 1094-C: The transmittal form summarizing the employer’s health insurance offerings.
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Form 1095-C: Detailed information on each full-time employee’s coverage status.
Both forms are generated automatically, ensuring that they are correctly formatted for submission to the IRS. Additionally, ACA-Track handles the electronic filing of XML data with the IRS, eliminating manual submission errors.
Fixing ACA Reporting Errors
Mistakes happen, but ACA compliance is unforgiving. ACA-Track helps businesses quickly identify and rectify any ACA reporting errors. With its intuitive interface and data-driven features, legal teams can be confident that all corrections are made promptly, reducing the risk of penalties.
Key Responsibilities for Employers Under ACA
Legal teams must understand the responsibilities that come with being classified as an Applicable Large Employer (ALE), including:
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Offering Health Coverage: ALEs must offer affordable, minimum value coverage to full-time employees (working 30+ hours per week).
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Tracking Part-Time and Variable Hour Employees: Even part-time employees who average 30 hours per week over a measurement period must be considered when determining ACA compliance.
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Reporting to the IRS: ALEs must submit both Form 1094-C and Form 1095-C to the IRS, detailing who was offered coverage and whether they were eligible. Additionally, these forms must be provided to employees by January 31 each year.
Failure to meet these requirements can result in shared responsibility payments, which are fines imposed by the IRS. These penalties can range from $50 to $270 per form, with larger penalties for forms filed after August 1st or not filed at all.
ACA Reporting for Self-Insured Employers
For employers with self-insured health plans, the reporting process is slightly different. In addition to reporting offers of coverage through Form 1095-C, they must also complete Part III of the form to report coverage details for employees and their dependents. Employers must ensure that they accurately report this information to avoid penalties.
Non-Compliance Penalties and IRS Penalty Letters
Penalties for ACA non-compliance can be severe. Employers may face fines for failing to file timely ACA forms or for offering unaffordable or insufficient coverage. Additionally, the IRS issues 226-J penalty letters to employers found in non-compliance. These letters outline the penalties owed and provide detailed instructions on how to dispute or resolve the penalty.
In the event of receiving a 226-J letter, legal teams must act promptly to respond to the IRS, correcting any discrepancies or demonstrating that the employer did offer affordable coverage.
Choosing the Right ACA Reporting Provider
For companies looking to streamline ACA compliance, outsourcing to a third-party provider like ACA-Track can offer substantial benefits. Here’s what legal teams should consider when evaluating potential providers:
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Upfront Costs vs. Long-Term Benefits: Some providers charge a flat rate, while others have fees based on the volume of forms filed. Legal teams should ensure they understand the total cost structure.
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Data Security: ACA data includes sensitive employee information, so it’s essential that the provider follows strict security measures. ACA-Track uses encryption and secure data transfers to protect this data.
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Support and Service: Providers like ACA-Track offer ongoing support, including a dedicated Client Success Advisor, ensuring businesses stay compliant and avoid penalties.
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Integration with Existing Systems: The provider should integrate seamlessly with your payroll and HR systems. ACA-Track offers robust integration options, making it easy to incorporate into your existing workflows.
The Role of Legal Teams in ACA Compliance
Legal teams play a critical role in ensuring that their organization complies with ACA regulations. This includes understanding the rules around employee eligibility, ensuring timely filing, and addressing any penalties or errors identified by the IRS. Legal teams should also coordinate with HR, payroll, and finance departments to ensure all data is accurately tracked and reported.
Conclusion
ACA compliance can be a complex and time-consuming task, but with the right tools and processes in place, legal teams can significantly reduce the risk of non-compliance. ACA-Track simplifies ACA reporting by automating data collection, tracking employee eligibility, and generating the required forms for submission to the IRS. With a user-friendly interface, data security, and ongoing support, ACA-Track helps organizations confidently meet their ACA compliance obligations.
For more information about how ACA-Track can support your ACA compliance needs, visit their official website.
