Frequently Asked Questions: ACA Compliance

What is ACA reporting?

The Affordable Care Act (ACA) requires insurers, self-insured employers, applicable large employers (ALE), and other coverage providers to issue certain reports to individuals and the federal government, including Forms 1094 and 1095 B and C.

Is the Employer Mandate still in effect?

Yes.  While the individual mandate has been repealed, the employer mandate is still in effect for calendar year 2020.

What is an Employer Mandate penalty?

Under the ACA, employers must offer health insurance that is both affordable and provides minimum value to 95% of their full-time employees (FTEs) and the children of those FTEs, through the end of the month in which those children reach the age of 26. This applies only to fully-insured employers with more than 50 FTEs or full-time Equivalents and all self-insured employers. Employees who work 30 or more hours per week are considered full-time for the purposes of the ACA.

  • The subsection (a) penalty, which may apply when an ALE fails to offer minimum essential coverage to at least 95% of its full-time employees (minus the first 30), is $2,700 (up from $2,570 for 2020). 
  • The subsection (b) penalty, which may apply when an ALE offers minimum essential coverage to the required percentage of full-time employees but the offered coverage either is unaffordable or does not provide minimum value, is $4,060 (up from $3,860 for 2020). The subsection (b) penalty is triggered if an employee receives government-subsidized coverage through an exchange.

What counts as affordable coverage under the ACA?

In 2021 employer-sponsored coverage will be considered affordable under the employer shared responsibility rules if the employee’s required contribution for self-only coverage does not exceed 9.83 percent of the employee’s household income for the tax year. ALEs should keep the affordability percentage in mind when setting 2021 employee contribution rates.

How many hours must an employee work to get health insurance?

30 hours or more per week or 130 hours per month.

What is an Applicable Large Employer (ALE)?

Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year.

  1. If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. 
  2. If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions.

Two provisions of the Affordable Care Act apply only to applicable large employers (ALEs):

  1. The employer shared responsibility provisions; and
  2. The employer information reporting provisions for offers of minimum essential coverage

What is the Safe Harbor rule for the ACA?

Affordability of healthcare coverage offered by employers to its full-time employees is an important part of the formula to satisfy the ACA Employer Mandate that demonstrates ALEs have appropriately offered affordable health coverage. The IRS provides three affordability safe harbors that employers may claim when submitting their annual ACA information returns.

The three safe harbors employers can use when proving ACA affordability to the IRS are:

1. Rate of Pay

2. W-2

3. Federal Poverty Line (FPL).

What are ACA Reporting Requirements? What are the required ACA forms?

ALEs must report to the IRS information about the health care coverage, if any, they offered to full-time employees. The IRS will use this information to administer the employer shared responsibility provisions and the premium tax credit.

ALEs also must furnish to employees a statement that includes the same information provided to the IRS. Employees may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.

All employers over 50 employees will submit a 1095-C to employees and a 1094-C to the IRS.

Self-Insured employers under 50 employees will submit a 1095-B to employees and a 1094-B to the IRS.

Is health insurance required to be ACA-Compliant?

Yes. Employers must make an offer of affordable health insurance to all Full Time benefit eligible employees. The employee does not need to take the coverage; the offer is what is important.

What is the difference between a Full-Time Employee (FTE) and Full-Time Equivalent Employee?

For the purposes of determining whether an employer is an ALE, an employee is counted as full-time if they work 30 hours a week or at least 130 hours during the month. A full-time equivalent employee is a combination of part-time employees who are equivalent to a full-time employee.

Are businesses and organizations permitted to outsource ACA reporting?

Yes, businesses can and should outsource their ACA reporting to a trusted vendor like MZQ.

What are the advantages of using an ACA Compliance Consultant like MZQ?

Expertise!  The correct vendor will have knowledge of the requirements and the applicable codes. MZQ Consulting helps people navigate the complex world of employee benefits compliance through our deep expertise and superb client service!

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