Here’s how to explain ACA penalties to your C-suite and get results

Here’s how to explain ACA penalties to your C-suite and get results

Life in HR can be challenging and that’s putting it lightly. Managing the on-and off-boarding of employees, supporting perks and wellness initiatives and ensuring compensation equity can all be taxing. But it’s the managing of the health reform mandate, that has many HR professionals feeling the extra pressure these days.

Simply put, the stakes are higher now, the costs for failure greater and maintaining compliance with Affordable Care Act (ACA) regulations is something HR professionals cannot afford to face alone. Support from the C-suite is necessary, and it all starts with a conversation.

The advent of real penalties

Under the mandate, employers with over 50 full-time and full-time equivalent employees are required to offer healthcare coverage to 95 percent of their full-time employees. Some companies, however, have not met these guidelines or did not fill out their IRS forms correctly. The penalties for failing to do so are now appearing as assessed fines, and this infographic demonstrates how quickly penalties can climb.

Yet while HR professionals are well aware of these ramifications, many C-suite executives are not. If this is true in your company, the following strategies can help you have this important conversation with your C-suite.

Showing your C-Suite the numbers

  • Good faith alone will not eliminate your company’s penalty risk or prevent a full IRS audit. Instead, failing to comply makes receiving an assessment a real possibility.
  • When you talk to your C-suite executives, show them the numbers that dictate the situation for 2022.
  • Medical benefits must be offered to 95 percent of all full-time employees in companies with 50 or more full-time and full-time equivalent employees. Failure to do so may result in a $2,750 fine per full-time employee, minus 30 employees.
  • Coverage must be affordable, meaning less than or equal to 9.61 percent of household income. It must also qualify as minimum value coverage, meaning it covers more than 60 percent of medical services. Failure to meet this goal will result in a $4,120 fine per full-time employee who receives a premium tax credit for coverage on the exchange.
  • Forms 1095-C must be delivered to recipients by March 2, 2023. Failure to do so may result in a $280 fine per form that is not delivered.
  • Forms 1094/1095 must be electronically filed to the IRS by March 31, 2023.  Failure to do so may result in a fine of $280 per form and failure with intentional disregard may escalate the fine to $560. This second clause is important; make sure your C-suite understands the difference.

If your C-suite executive is more of a visual person, this infographic can help you relay this key information.

Highlight that these fines are per employee and, while the above penalties represent annual amounts, they actually compound each month unless action is taken. You can also show them real-world examples of possible scenarios involving your own company so they can truly understand their potential loss if ACA guidelines are not met.

Showing your C-suite the options

Once your executives realize the potential risk, lay out your initiatives to remain compliant, and reinforce the importance of an automated ACA solution that supports helping you:

  • Manage ACA eligibility, so you know when and to whom to make an offer of coverage.
  • Fulfill state individual mandate employer reporting for all states with reporting requirements.
  • Explore safe harbor options to determine the most cost-effective household income and affordability thresholds under Federal Poverty Line, Rate of Pay and W2.
  • Determine “Offer of Coverage” codes to eliminate manual code entry.
  • Manage compliance on a monthly basis to ensure the 95 percent threshold is protected.
  • Deliver forms to recipients, filing with the IRS and making form corrections as needed.

Each of these steps is a vital component in your strategy to remain compliant, and Health e(fx) can help make it easier to comply, reduce your penalty risk and thrive within ACA guidelines. We can also work with you to process and resolve any IRS correspondence as it arises, providing you a simplified, reliable solution you can count on. Because in an ever-changing healthcare market, your change should be for the better.

To learn more about how Health e(fx) can help you manage your compliance with ACA guidelines, contact us today.

This information is intended as general information; not as any legal, tax or financial advice.