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ACA Penalties: Insurance Inadequacies Can Cost You

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.

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Small Employers, Listen Up: ACA Fine May Impact You

Up until this point, small businesses – those with less than 50 full-time or full-time equivalent employees – were not faced with costly fines like their Applicable Large Employer (ALE) counterparts under the Affordable Care Act (ACA). But that’s no longer the case, according to a tax imposed under Internal Revenue Code Section 4980D.

The IRS announced it no longer will waive penalties for small employers who reimburse or pay an employee’s health insurance premium that is not a part of an employer sponsored group plan. The rule, which was already in place for ALEs, will impose a $100 per-day excise tax on employers who continue this practice. The maximum amount an employer will be fined in a calendar year is $36,500 per employee.

Small employers, however, are not subject to the ACA’s Employer Shared Responsibility provisions, which require ALEs to offer affordable coverage that provides minimum value and essential coverage to a certain percentage of their employees. ALEs subject to the rule then could be fined on a month-by-month basis for individuals who receive a tax credit through an exchange, also known as a health insurance marketplace.

The rule was established in IRS Notice 2013-54, 2013-40 IRB 287, which stated that “employer payment plans” fail to comply with the ACA’s group health plan. Under this guidance, “employer payment plan” applies to group health plans where an employer chooses either to reimburse employees for all or some of their premium expenses paid for that individual’s coverage, in lieu of offering health insurance. Temporary relief was available for ALEs, but that expired June 30.

While this is one of the first penalties small businesses face as a result of the ACA, employers with less than 25 full-time equivalent employees may qualify for tax credits, which could aid more than 90 percent of U.S. firms.



Author Bio: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attuned to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

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Get Ready, ACA Fines Abruptly Elevated

Shortly after the Affordable Care Act’s (ACA) subsidies were upheld by the U.S. Supreme Court, President Barack Obama signed into law a trade bill that, in some cases, more than doubled the fines associated with the Affordable Care Act’s (ACA) employer mandate reporting requirements. With nearly two-thirds of businesses not ready to comply with the 2015 reporting requirements, the drastic increase for non-compliance makes the mandatory stipulation even more critical for businesses that face their first year of required reporting under the health care directive.

The IRS released two rules for employer reporting requirements which are seen in Sections 6055 and 6056 and will be reported via forms 1094/95-B or -C. ACA penalties for incomplete or incorrect returns filed or statements furnished for these aforesaid forms are imposed under IRS Sections 6721 and 6722. Section 806 of the bill – The Trade Preferences Extension Act of 2015, passed on June 31 – reads that Section 6721 of the IRS code is amended as follows:

  1. In general, the penalty for failure to file an information return on or before the required filing date or for filing forms with incomplete or inaccurate information will increase from $100 to $250;
  2. the maximum total amount of penalties allowed in a calendar year for an employer increased from $1.5 million to $3 million; and
  3. if there is intentional disregard to file the required forms, the aforementioned $250 fine will double to $500 and the $3 million maximum amount will cease to exist, meaning no cap will remain for that calendar year.

Additionally, the penalty for failure to file and properly furnish Form 1095-C to both the IRS and individual employees also will double from $250 to $500.

Good Faith Effort

Despite the harsh penalties, companies that demonstrate a “good faith effort to comply with the [ACA] reporting requirements” will not be penalized, according to the IRS. This language remains in effect and states, “relief is provided from penalties under Sections 6721 and 6722 for returns and statements filed and furnished in 2016 to report coverage in 2015 for incorrect or incomplete information reported on the return or statement.”

However, no relief will be granted for those companies that cannot show a good faith effort to comply with the reporting requirements by:

  1. timely filing an information return with the IRS and
  2. furnishing an information statement to individuals.

What’s Next?

In a recent report by PricewaterhouseCoopers, 46 percent of employers stated they are unsure how they are going to deliver the required ACA forms to the IRS and their employees. It is vital that employers develop a process for compiling the necessary data to complete and distribute these complex IRS forms accordingly.

For compliance free of pain, stress and costly fines, Paycom’s Enhanced ACA solution offers the convenience of having all your ACA data in a real-time dashboard. Plus, Forms 1094/95-B or -C can be filed and furnished on your behalf timely and accurately.

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: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attuned to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

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Affordable Care Act Subsidies Upheld: What You Need to Know

Yesterday, in a 6-3 decision, the U.S. Supreme Court upheld the federal subsidies of the Affordable Care Act (ACA) by ruling that the tax credits for health insurance are authorized in the 34 states that have a federal marketplace.

As a result, subsidies will remain available for qualifying individuals, regardless of whether they obtain coverage on a state or federal exchange.

What This Means for Employers

Because the Supreme Court ruled in favor of the federal government’s position, individuals will remain eligible for subsidies. However, employees eligible for employer-sponsored health plans may not be eligible for subsidies through the marketplace, so long as the employer-sponsored plan meets affordability standards under the ACA.

Employees are eligible to pursue health insurance through the marketplace and may qualify for subsidies if the employer does not provide coverage that the ACA considers “affordable” (if the employee’s share for the lowest-priced plan does not exceed 9.5 percent of his or her annual household income) or meets the ACA’s standard of providing “minimum value” (by paying at least 60 percent of the cost for medical services).

Employers should continue to take control of their ACA compliance. All requirements remain as usual. Employers held to the ACA mandate still must handle reporting data to include the measurement, stability and administrative period. For Applicable Large Employers (ALEs), filing with the IRS remains mandatory and statements must be provided to full-time employees regarding health coverage.

Cadillac Tax: Still an ACA Hot Topic

In addition, employers with high-cost health plans may wish to consider paring back benefits in order to dodge the 40-percent excise tax that goes into effect in 2018. This so-called “Cadillac tax” applies to plans in which benefits exceed $10,200 for individuals and $27,500 for families.

Experts estimate that 60 percent of employer plans will exceed the individual and family limit by 2018.

Compliance Tools   

When it comes to the ever-complex, ever-changing ACA, more than two-thirds of businesses still are not compliant. Paycom can erase the concerns by eliminating the threat of noncompliance.

For compliance free of pain, stress and costly fines, our new Enhanced ACA solution offers the convenience of having all your ACA data in a real-time dashboard, plus Forms 1094/95-B or -C are filed with the IRS timely and accurately on your behalf.

Add Paycom’s Enhanced ACA to your all-in-one human capital management solution today.

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: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attuned to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

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