Every January we make our resolutions for the future. These resolutions may be personal — losing weight, exercising more or taking care of ourselves. Resolutions and commitments are important for companies as well — and studies show companies that set goals early in the year stand a better chance of achieving them. This is especially true when we focus on today’s topic, managing your Affordable Care Act (ACA) compliance.
The ongoing monitoring and continual management of ACA compliance is a practice many companies don’t follow today, choosing instead to wait until the end of the year to determine how they fared in their compliance efforts. By then, however, the window of opportunity to mitigate compliance issues has passed, and penalties may have already accumulated. Put simply, your ACA compliance can’t wait. It’s already March and if you aren’t feeling confident with your ACA compliance and current solution, it’s time to act. Here’s why.
If your company fails to meet its ACA compliance requirements (specifically section 4980(a) and/or (b) of Employer Shared Responsibility Provision) you run the risk of being assessed penalties by the IRS. And, each month and year you are out of compliance, your assessed penalty risk accumulates.
Your company could be assessed under Penalty A, failure to offer minimum essential coverage to substantially all full-time employees. Or you could be assessed under Penalty B, failure to offer affordable coverage that meets minimum value requirements to its ACA eligible full-time employees.
If this happens, the IRS will send you Letter 226-J to notify you that you may not have complied with section 4980(a) and (b) of the Employer Shared Responsibility provision of the ACA Employer Mandate during the tax year. The IRS is sending employers letters who have potential penalties for the past several years. Which means you could be calculating your ACA compliance incorrectly for years and not even know it.
If your company is assessed under Penalty A for the 2021 reporting year, you could face estimated fines of $225 per employee per month for noncompliance. This means, if your company employs 5,000 full-time employees (minus the first 30 full-time employees) and does not meet the minimum offer requirements, your penalty assessment could be $3,354,750 just by the end of the first quarter alone!
An assessment of Penalty B could expose your company to fines of $338.33 per month for any employee who receives a premium tax credit or subsidy because they were not offered coverage that was affordable or met minimum value coverage; note, even if you offer minimum essential coverage to substantially all employees, you may still be subject to this assessment.
This means, if your company employees 100 full-time individuals who received a tax credit or subsidy, the penalty assessment could be $101,499 by the end of first quarter.
For details on these penalties and how to minimize your risk, visit our blog here.
Transparency is key to avoiding monthly financial risk
There is no time to wait. Because these fines accumulate monthly, take a proactive approach to ensure you are offering full-time employees timely offers of coverage. Since employers do not often know their employees’ household incomes, the ACA created three affordability safe harbors that can be used in lieu of household income. This helps employers determine if they have offered affordable coverage to their full-time employees that provides minimum value coverage and is considered a qualified health plan. This approach will ward off the compounding penalties month over month in the future. You can’t change the past, but you can ensure your future financial risk is managed proactively by auditing forms, validating compliance, expediting corrections and making offers of coverage as soon as possible.
Health e(fx) can help with that.
Do you know where you sit today from an ACA compliance perspective? Risk transparency is key.
Our compliance monitoring solution and monthly audit defense helps your company manage its ACA compliance while providing you total visibility into your current metrics and trends. Our technology allows an employer to easily track and manage offers of coverage for employees who are approaching full-time eligibility or who are nearing their waiting period completion. In addition, our analytics and eligibility forecasting strategies can allow your company to chart a course for the rest of the year so you can better prepare for your ACA compliance needs instead of reacting to challenges once they arise. That’s critical because when you’re starting a new resolution, being ahead of the challenge is always so much easier than trying to catch up.
To learn more about how solutions from Health e(fx) can help you chart a course for successful ACA compliance in 2021, contact us today.