ACA Compliance: a guide for small businesses

The Affordable Care Act (ACA) has transformed the landscape of employer-provided health insurance in the United States. One of the central tenets of the ACA is the Employer Mandate, which requires certain employers to offer health insurance coverage that meets specific criteria to their full-time employees. Failing to comply can result in significant financial penalties.

This blog explores the key aspects of ACA compliance, how to navigate the complexities, and why external support might benefit your business.

Understanding the ACA employer mandate

The ACA’s Employer Mandate stipulates that employers meeting the criteria of an Applicable Large Employer (ALE) must offer health insurance that is both affordable and provides minimum value to their full-time employees and dependents. An ALE is an employer with 50 or more full-time or equivalent employees.

Key requirements:

1. Minimum Essential Coverage (MEC): Health insurance must cover at least 95% of the employer’s full-time workforce and dependents.
2. Minimum Value (MV): The coverage must be designed to pay at least 60% of the total cost of medical services for a standard population.
3. Affordability: The employee’s share of the premium for employer-provided coverage must not exceed a certain percentage of their household income.

Failing to meet these requirements can result in employer-shared Responsibility Payments (ESRP) under IRC Section 4980H. Even employers with fewer than 50 employees that offer group medical benefits need to adhere to certain ACA compliance standards.

The three pillars of ACA Compliance

To comply with the ACA, employers must focus on three essential elements:

1. Minimum Essential Coverage (MEC): This is the baseline level of health insurance coverage employers must offer their full-time employees and dependents. It ensures that most employees have access to essential healthcare services.
2. Minimum Value (MV): Coverage must be substantial enough to cover at least 60% of the total allowed benefits costs provided under the plan, ensuring insurance is both available and meaningful.
3. Affordability: The cost of the health insurance offered to employees must be reasonable. Specifically, the employee’s cost for self-only coverage should not exceed a set percentage of their household income (8.39% for the 2024 tax year, for instance).

ACA Compliance tracking and reporting

For ALEs, maintaining ACA compliance involves meticulous tracking and reporting. Given the complex regulatory landscape and the need for precise data management, this can be challenging.

Why external support is beneficial

Enlisting the help of a specialized ACA compliance provider can streamline this process and offer several benefits:

• Regulatory Expertise: Staying up-to-date with ACA regulations is challenging. A compliance vendor with a deep knowledge of the regulatory environment can ensure your business meets all requirements.
• Advanced Data Management: Compliance involves handling complex data from various sources such as payroll, benefits administration, time and attendance systems, and HR platforms. A capable vendor can efficiently manage and integrate this data.
• Comprehensive Service: From initial assessment to filing reports at both federal and state levels, a full-service provider can manage the entire compliance process.
• Audit Support: In the event of an IRS audit, having a vendor with a proven track record of successful audits can provide peace of mind and reduce the risk of costly penalties.

ACA compliance is critical to managing a business with 50 or more employees. The complexities involved require a thorough understanding of the regulations and meticulous data management. By leveraging external support, you can ensure your business remains compliant while focusing on growth and success.

Don’t wait until it’s too late.

Reach out to a specialized ACA compliance provider to conduct a free ACA Penalty Risk Assessment and secure your business’s compliance today.

For more information on how PaisleyHR by Fingercheck can help you navigate ACA compliance and support your business growth, contact us today.