Employer Checklist for ACA Compliance: What Your Company Needs to Know

The Affordable Care Act (ACA) imposes a number of requirements on employers. If these requirements are not met then fines will be levied on employers who do not comply. Whether you are a small or large employer, and whether you do or do not offer health coverage to your workers, some of the ACA’s requirements apply to you.

The following definitions will help you determine which requirements apply to your company:

• Applicable large employer (ALE): An Applicable large employer is any company or organization that has an average of at least 50 full-time employees or “full-time equivalents (FTEs)”.
• Full-time employee: Employees who average about 30 hours per week (or 130 hours a month) as determined by the monthly or look-back measurement method of measuring work hours.
• Grandfathered Plan: Any group health plan that existed since March, 23 or 2010 who have not eliminated benefits or decrease the employer’s coverage cost by 5%, or increased the employee’s deductibles and co-pays over specific levels since that time.
• Qualified Health Plan: Qualified health plan (insured or self-funded plan) that provides minimum essential coverage (MEC). Dental- or vision-only plans, and most health flexible spending accounts, employee assistance plans, and fixed indemnity plans are not MEC.
• Minimum Value: Group health plan’s share of total allowed costs is at least 60% of such costs and plan includes substantial coverage for physician services and inpatient hospital services. If the employee’s cost to enroll for self-only coverage does not exceed 9.66% of income then the minimum value plan also is affordable.

• Provide all employees within 14 days of hire Employer Notice about Health Insurance Exchanges (Marketplaces)
• For grandfathered plans only, provide Grandfathered plan notice materials describing the plan’s benefits; e.g., enrollment materials, summary plan description (SPD).
• For non-grandfathered plans only, provide Patient Protection Notice at enrollment and include in summary plan description (SPD).
• Provide at enrollment and upon request a Summary of Benefits and Coverage (SBC).

• For non-grandfathered plans, limit the plan’s annual out-of-pocket maximum for essential health benefits to no more than $6,850 per person and $13,700 per family (2016 plan year).
• Limit the amount of annual elective contributions to Health flexible spending to no more than $2,550 (2016 plan year).
• For self-funded group health plans, count average number of participants for the plan year ending in 2015 and pay the Patient-centered Outcomes Research Institute (PCORI) annual fee by July 31, 2016.
• For self-funded plans that provide minimum value, report the plan’s average enrollment count by November 15 and pay the Transitional Reinsurance Program (TRP) annual fee by the next January 15, or in two installments, by January 15 and November 15. (Certain self-funded self-administered plans are exempt for 2016; these typically are union trusts.)

• Report total cost of each employee’s health coverage on Form W-2 (box 12). (Employers that filed fewer than 250 Form W-2s for 2015 are exempt for 2016.)
• Employer Reporting – 6056 (ALEs only): Prepare and distribute Form 1095-C to each person who was a full-time employee for any month in 2016 to report whether health coverage was offered. Form 1095-C is due by Janaury 31, 2017; then file copies along with Form 1094-C with the IRS by February 28, 2017 if filing by paper (or by March 31, 2017 if filing electronically).
• Health Coverage Reporting – 6055 (self-funded plan): For Employers with less than 50 FT or FTEs prepare and distribute Form 1095-B to persons covered by the plan for any month in 2016, and file copies along with Form 1094-B with the IRS. Due dates are the same as shown for Employer Reporting above. If the Employer is an ALE, use Forms 1094-C and 1095-C in lieu of Forms 1094-B and 1095-B.

• Under the Affordable Care Act’s employer shared responsibility provisions, certain employers (called applicable large employers or ALEs) must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions”.
• The first, is penalty 4980H(a), this penalty is applied when an employer does not offer coverage to 5 or 95% of full-time employees, whichever is greater and at least one full-time employee receives the premium tax credit. The amount of the payment for the month equals the number of full-time employees the employer employed for the month (minus up to 30) multiplied by 1/12 of $2,160 ($180 per month).

• There is also the 4980H(b) penalty, which is levied at $270 per month or $3,240 per year, times the number of full-time employees who receive cost assistance in the form of a premium tax credit or subsidy on a health insurance exchange. Employees will be able to receive cost assistance if the employer’s offered coverage, is not calculated to be “affordable” or does not meet “minimum-value” coverage standards, as defined by the ACA regulation.

NOTE: An employer can be subject to only one penalty, not to both of them, and the 4980H(b) penalty cannot be greater than the amount of the 4980H(a) penalty if it applied.

Employers are advised to maintain detailed documentation of all materials, data and records used in meeting their requirements under the Affordable Care Act.

Examples include:

• Copies of required notices and description of distribution processes.
• Data used in determining enrollment counts for purposes of PCORI and TRP fees (self-funded plans).
• Data used in preparing statements and IRS forms (1094s, 1095s, W-2s, as applicable) and description of distribution and filing processes.
• Keep records of employee hours of service and measurement methods for administration of the Employer Shared Responsibility.
• Document, by employee, whether the full-time employee definition was met and, if so, document the employer’s health coverage offer to the employee.
• Maintain proof of the plan’s status as minimum essential coverage, minimum value coverage and/or affordable coverage, as applicable.