ACA Employer Mandate: Reporting Requirements, Penalties & More

ACA Employer Mandate: Reporting Requirements, Penalties & More

With all of the hubbub surrounding the Affordable Care Act (ACA) this past year, now would be a good time to review the employer mandate, its requirements and the penalties employers could face for non-compliance.

What Is the ACA Employer Mandate?

If an employer has 50 or more full-time or full-time equivalent employees on average in the prior calendar year, then that employer is deemed an “Applicable Large Employer” for the current calendar year, as required by the ACA. Here’s the tricky part, a full-time equivalent employee is an employee that is not full-time.

So, let’s look at an example: An employer has 40 full-time employees and 20 part-time employees all working 20 hours per week. Those 20 part-time employees make up 10 full-time employees working 40 hours per week, or 10 full-time equivalents, under the ACA. Forty full-time employees plus 10 full-time equivalents equal 50 full-time or full-time equivalents, making that employer an Applicable Large Employer for purposes of the ACA.

An Applicable Large Employer is subject to both the employer shared responsibility provisions and the employer information reporting provisions, described below. If these provisions are not satisfied, then the employer may face penalties.

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Employer Shared Responsibility Provisions

What should employers do to avoid the penalties under the employer shared responsibility provisions? Think of this as two penalty boxes. For both, the employer must qualify as an Applicable Large Employer.

  • The First Penalty Box (Not Offering Coverage). As reported by Kaiser Family Foundation,
    • if the employer does not offer qualified health insurance satisfying the rules of the ACA to at least 95 percent of its full-time employees and their dependent children, and
    • at least one employee receives a subsidy or tax-credit on a marketplace, then
    • the employer pays $2,260 (indexed for 2017) divided by 12, multiplied by the number of full-time employees (minus up to 30) for each month the employer fails to offer coverage.
  • The Second Penalty Box (Not Offering Affordable Coverage & Coverage Providing Minimum Value).
    • If the employer does not pay for at least 60 percent of the health care expenses, and
    • one full-time employee receives a tax credit on a marketplace, or
    • if any employee does not have to pay more than 9.69 percent (indexed for 2017) of their household income as determined by the ACA, and
    • one full-time employee receives a tax credit on a marketplace, then
    • the employer pays monthly $3,390 (indexed for 2017) divided by 12, for each employee receiving a premium tax credit for that month (up to the maximum of The First Penalty).

Employer Information Reporting Provisions

Although familiar to many employers, it’s time to start prepping again for filing ACA reports on ACA offers of coverage and coverage itself. According to BNA, large employers — having more than 50 employees in the previous year — must use Form 1095-C along with transmittal Form 1094-C to report coverage offered to full-time employees in the previous year. Forms 1095-B and transmittal Form 1094-B are for minimal essential coverage reporting.

If forms are not filed or are incorrect, then employers may face a $260 (indexed for 2017) penalty per form.

The deadline for Forms 1095-B and 1095-C to employees is January 31, 2018. All forms filed by paper are due by February 28, 2018, and filed electronically by March 31, 2018.

Full compliance with the ACA for 2017 is mandatory. Employers must be aware of all ACA provisions affecting them, including more recent provisions — such as the ACA’s nondiscrimination requirements and the new summary of benefits and coverage requirements. Despite what you may hear on the news, you must not take your eyes off the ball. Any employer who does not comply with the ACA employer mandate potentially faces penalties — and these can be significant.

This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.

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