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ACA Penalties: Insurance Inadequacies Can Cost You

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Offering employees health insurance is not enough to avoid the penalties associated with the shared responsibility requirements of the Affordable Care Act (ACA).  While many large employers already provide what they believe to be a good health plan for employees, the ACA has set the standard for what is considered adequate and affordable coverage as well as the penalties for non-compliance.

Health Insurance is considered inadequate if it pays less than 60 percent of covered health care expenses and unaffordable if employees have to pay more than 9.5 percent of their household income for single coverage. Since most employers do not have a way of tracking their employees’ household income, the IRS has provided employers a safe harbor whereby they will be considered as having met the insurance affordability obligation if the employee’s insurance is less than 9.5 percent of the employee’s Form W-2, Box 1 income.

In 2014, employees without adequate and affordable coverage can turn to a Health Insurance Marketplace, also known as an exchange, to find and compare private health insurance options. If even one of your employees elects coverage through the exchange, you could be fined an annual penalty of up to $3,000 per full-time employee, or $2,000 per total number of full-time employees (not counting the first 30 employees), whichever is less. The employee’s eligibility for the exchange is also dependent on the employee’s household income. Generally, those who make between 100 and 400 percent of the poverty level would qualify. For 2012, the poverty level was $23,050 for a family of four.

As you can see, for large employers simply providing insurance may not be enough to keep you ACA compliant. Something else to note is that even if you do provide adequate and affordable health insurance to your employees, the ACA and Fair Labor Standards Act (FLSA) still require you to notify employees of the coverage options for the Health Insurance Marketplace.

Sign up for our webinar – Think Your Business is ACA Compliant? – and read our ACA blog post on “Companies with Employer-Sponsored Health Plans Must Still Notify Employees of Exchanges” to learn more.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.



Author Bio:

Newman Wells is a writer, designer and entrepreneur with over 20 years of corporate marketing experience. Passionate about B2B marketing, Newman Wells specializes in helping businesses define their value propositions by simplifying technical jargon for easier-to-digest messages that drive sales. She has spent the last two decades building successful marketing departments from the ground up and has been Paycom’s director of marketing since 2005.

Deadline Extended

Employer Deadline Extended for Furnishing 2017 ACA Forms

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Distribution of 2017 Affordable Care Act (ACA) Forms 1095-B or -C to your employees has been extended.

As issued in Notice 2018-06, the IRS has extended the deadline from Jan. 31 to March 2. (However, the deadline to provide Forms W-2 and 1099 to employees and contract workers remains as Jan. 31.)

Filing deadlines unchanged

While the deadline to furnish forms was extended, the filing deadlines remain the same: Feb. 28 for paper forms, and April 2 for electronic forms.

IRS Notice 2018-06 emphasizes that employers who do not comply with the due dates for furnishing or filing are subject to penalties under sections 6722 or 6721.

Good-faith transition relief extended

The IRS also announced the extension of good-faith transition relief. This may allow an employer to avoid some penalties if it can show that it made good-faith efforts to comply with the information reporting requirements for 2017.

This relief applies only to incorrect and incomplete information reported on the ACA forms, and not to a failure to file or furnish the forms in a timely manner. Additionally, the IRS stated it does not anticipate extending either the good-faith transition relief or the furnishing deadline in future years.

Contact a trusted tax professional if you have questions on how this may affect your business specifically.

Click here to read more about how the ACA is affect by the new Tax Cuts and Jobs Act.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

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Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Employers Unaffected by ACA Changes in New Tax Law

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On December 22, President Trump signed the Tax Cuts and Jobs Act. The bill includes a provision that reduces the penalty for not complying with the Affordable Care Act’s (ACA) individual mandate to $0, effectively removing the penalty for individuals who do not have health insurance coverage after the effective date of Jan. 1, 2019.

However, this update will not impact employers, since the law does not remove the employer mandate (the requirement that large employers offer health insurance coverage to their full-time employees or pay a penalty) or the associated employer reporting requirements. Large employers subject to the mandate still face penalties if they fail to comply with either, and the IRS has begun sending out notices with preliminary assessments of the employer shared responsibility penalty for tax year 2015.

Employers subject to the employer mandate should continue to comply and be prepared to file Forms 1094 and 1095 with the IRS in accordance with the normal deadlines.

For the 2017 tax year, the deadlines to provide Forms 1095-C to employees is Jan. 31, 2018.  The deadline to file Forms 1094-C and 1095-C with the IRS is Feb. 28, 2018 if filing paper forms, and April 2, 2018, if filing electronically.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

ACA Employer Shared Responsibility Payments

IRS Quietly Prepares to Assess ACA Employer Shared Responsibility Payments

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Late last week, without announcement, the IRS amended a FAQ about its planned process for assessing employer shared responsibility payments (ESRPs) under the Affordable Care Act (ACA). Previously, the document suggested that further guidance would be forthcoming, prior to notifying affected applicable large employers (ALEs) about potential penalties owed under the federal health care law’s employer mandate.

That statement is now gone. In its place are several questions and answers detailing how the IRS will notify companies that they may owe an ESRP. In addition, the IRS intends to send assessments for the 2015 tax year in “late 2017,” which gives the agency approximately six weeks to do so.

Deadlines

The IRS notification will take the form of Letter 226J, which will include a month-by-month payment summary and a list of employees who:

  • were full-time employees for at least one month of the tax year
  • also received a premium tax credit
  • and did not allow the employer to qualify for an affordability safe harbor or other relief

While Letter 226J will indicate the employer’s deadline to respond, recipients generally will have 30 days from the letter’s printed date to contest its information. Then, following correspondence between the IRS and the ALE, if the agency determines the employer indeed is liable for an ESRP, the IRS will issue a demand and instructions for payment, via Notice CP 220J.

The FAQ’s changes to describe specific procedures and deadlines represent the clearest indication we have received that the IRS soon will notify ALEs that they may owe an ESRP for 2015. If such notifications are sent within the next few weeks, it will mark significant news.

For more on ACA, check out the October 2017 article: Trump Announces 2 Changes to ACA 

Tags: , ,
Posted in ACA, Blog, Featured

Erin Maxwell

by Erin Maxwell


Author Bio:

As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

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