The Affordable Care Act’s (ACA) “individual mandate” was repealed in 2018 – old news for most readers. While it lasted, the mandate required individuals to obtain health insurance or incur a tax penalty. What’s less commonly understood is that the individual mandate was only half of the penalty story: Congress did not repeal the ACA requirements for employers. For employers with 50 or more employees, the ACA requires that they provide access to qualifying health coverage.
What is “qualifying coverage” you ask? The IRS lays it out here.
IRS Steps Up Enforcement of ACA Against Employers
Employers who don’t provide qualifying coverage may be subject to steep penalties. While these penalties have been a part of the law since its inception, they’ve only recently begun to make waves. Up to now, the IRS had suspended enforcement of the ACA penalties to give businesses time to prepare. But that grace period has expired, and the IRS is beginning to impose fines that – in some hair-raising scenarios – reach multiple millions of dollars.
Know Your ACA Reporting Requirements
To avoid running afoul of the IRS, businesses need to provide qualifying coverage AND meet the reporting requirements. Penalties for failing to report are also steep: $270 per form not filed, with punitive penalties of an additional $270 for intentional disregard. Also, the IRS requires two forms per employer: one for employees and one for IRS. So the penalty for intentional disregard of the reporting requirement can quadruple the fine to $1,080, up to a maximum of 3,339,000!
Updated ACA Timeline
The ACA is law and reporting is still required! Bookmark the timeline below for easy reference. These are the reporting deadlines, penalties, and ACA provision dates you’ll need to know going into 2020.
January 1, 2019: Individual Mandate Repealed, Shared Responsibility for ALEs In Effect
The individual mandate is repealed, beginning with the 2019 reporting period for Federal taxes. However, some states are replacing the Federal individual mandate with state mandates Employers with more than 50 Full Time Equivalent employees measured over the prior calendar year still must offer Minimum Essential Coverage (MEC) and a Minimum Value (MV) health plan that is affordable to its employees or face stiff penalties. There are safe harbors using W2 income, hourly wage rates, or the federal poverty level for affordability calculations based on facts and circumstances of employee compensation.
January 31, 2020 – ACA Reporting Deadline
Deadline for employers to provide employees with information on health coverage offered. Based on history, 30-day extensions are likely. Since the federal individual mandate was repealed employees don’t need to worry about these forms unless state mandates come into play.
February 28, 2020 – ACA Paper Reporting Deadline
Paper filing deadline for submitting all annual report forms to the IRS. Keep in mind the deadline for future years will be February 28th.
March 31, 2020 – ACA Electronic Reporting Deadline
Electronic filing deadline for submitting annual report forms to the IRS.
January 1, 2022 – Tax on High-Cost Insurance
This is a new tax delayed until 2022. Otherwise known as the “Cadillac Tax,” it applies to insurers of employer sponsored health plans that cost over $10,200 for individual coverage or family plans that cost over $27,500.
How to Prepare for 2020
Have your payroll, benefits, and tax experts review your benefit plans and compliance reporting. And, to toot our own horn a bit, as a PEO we excel at helping overburdened businesses manage regulatory compliance. Read more about PEOs or fill out our quote form to see how we can help.
This is the outlook for ACA compliance requirements as they stand – but it’s probably far from the last word. Health care will continue to be a hot button issue in politics for some time, and we recommend checking back frequently to see how ACA laws are changing.