By now, you are well aware of the ACA compliance requirements and the recent IRS extension. In January, we provided our readers with a summary of required ACA forms; however, we wanted to provide some additional advice.
Below we’ve listed out a few tips we believe are pertinent to dealing with the ACA with accuracy and peace of mind.
1. Know the requirements
The first step in complying with ACA standards is the understanding of the forms that are required to be submitted to the Internal Revenue Service (IRS) each year. These forms assist individuals in completing their taxes and aid the IRS in enforcing the Patient Protection and Affordable Care Act (PPACA) law.
2. Log and monitor actual hours worked (hours of service) for part-time workers
Documenting hours worked under the Affordable Care Act will require businesses to document all work and paid time off for each part-time employee. Most employers already record time for non-exempt employees (minimum wage employees and those who qualify for overtime) under the Fair Labor Standards Act (FLSA). ACA regulations, however, could place employers between a rock and a hard place if they are not prepared to handle the administrative requirements of the new regulations.
For the purposes of ACA compliance, hours of service are:
- Hours for which an employee is paid, or entitled to payment, for the performance of duties for the employer
- Hours for which an employee is paid or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence
Hours of service are used to determine if an individual employee has worked enough hours to be considered full-time. One key provision of this law requires employers to maintain a record of the hours actually worked, and if no record is maintained, the employers must assume eight hours for each applicable day under this scenario. This area of the law is somewhat complicated and requires some advanced knowledge and understanding on the part of the employer.
3. Supply the IRS with the necessary paperwork
The Affordable Care Act added section 6056 to the Internal Revenue Code. It requires Applicable Large Employers (ALEs) to file information returns with the IRS and provide statements to their full-time employees about the health insurance coverage the employer offered. The employees then submit the information provided by these forms to the IRS when completing their personal taxes.
An ALE is an employer that employs an average of at least 50 full-time employees on business days during the preceding calendar year.
Employers (regardless of their number of employees) that sponsor self-insured group health plans also are required to report information under section 6056 about the health coverage they provide each employee.
There is relief for employers who submit incorrect or incomplete information, not those who fail to comply with the submission. The relief is only available for those who demonstrate good faith and an effort to comply with the regulations, and generally only allows for additional time to develop the appropriate procedures.
4. Be prepared for an IRS audit
All employers who fall under the ACA compliance umbrella need to have a system in place that will produce the appropriate audit reports on an ongoing basis. If you are within compliance of the regulations, you can sleep soundly.
In the event of an audit, the employer will be required to show proof that coverage should not have been offered to an individual variable hour employee. It is likely these types of audits will continue to occur many months or even years after a filing deadline. Consequently, employers will need to maintain comprehensive records related to employee hours worked and substantiate their rationales for offers or non-offers of coverage.