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The Current State of the ACA Employer's Mandate

The Current State of the ACA Employer's Mandate

There has been a lot to be done about the Affordable Care Act: from passing the law under President Obama to repealing the law under President Trump. This has left many people confused about where we are today: what is the current state of ACA?

The ACA remained in effect in 2019, especially for U.S. employers, and for the time being remains in effect in 2021 and beyond. The individual mandate (which requires people to have ACA-compliant medical coverage or pay a fine) also remained in force until 2019, a surprise to many.

The TCJA touted repealing the health law repeal. However:

  • It has not made any changes to the ACA employer mandate.

  • It did revoke the individual mandate, but only in the sense that the penalties are reduced to zero, and this revocation only came into force in 2019.

What is the Affordable Care Act (ACA)?

The Affordable Care Act (ACA) is the comprehensive health care reform passed by President Barack Obama in March 2010. Formally known as the Affordable Care and Patient Protection and Affordable Care Act and often referred to simply as Obamacare, the law includes a list of health care policies designed to extend health insurance coverage to millions of uninsured Americans.

The law extended Medicaid eligibility, created health insurance subsidies, ruled that Americans buy or get health insurance, and prohibited insurers from denying coverage (or charging more) because of pre-existing conditions. It also allows kids to continue with their parents' insurance until the age of 26.

ACA Employer Mandate 101, including some changes for 2020

The employer ACA mandate remained in effect for 2019, and all compliance rules continue to apply. At the beginning of the year and the 2020 tax return approaches, this would be a good time to discuss the details of the employer's mandate: who should comply, how and when to comply, and what would be the repercussions.

Who should comply?

The ACA employer mandate applies to all large employers or applicable ALEs. The law defines ALEs as U.S. employers with at least 50 full-time employees (or equivalent) in the previous fiscal year. Affiliates or subsidiaries are generally treated as employers to determine ALE status. This means that they must match their number with the total number of full-time employees.

What do you need to do to comply, and when should you do it?

Employers must follow two different rules:

ACA coverage mandate

According to ACA, employers must provide regular (usually monthly) high-quality health insurance to full-time employees or face a fine. It gets complicated.

Please note that the affordability threshold percentage has increased to 9.78% for the 2020 tax filing year.

IRS reporting requirements

At the end of the year, the ACA requires employers to demonstrate that they made the right offer to the right employee at the right time. How?

  • By providing each eligible full-time employee with Form 1095-C by March 2, 2021.

  • Providing copies of these 1095-C to the IRS along with a 1094-C: Articles must be submitted by March 1, 2021. Electronic submission (mandatory for employers over 250 1095-C) must be completed by March 31, 2021.

Are there any penalties associated with non-compliance?

Yes! Employers who fail to comply or do not comply on time or do not properly document compliance will face serious financial penalties. And they've increased for 2020: the maximum penalty has increased to $ 2,570 per year for each full-time employee (minus the first 30 FTEs). The membership penalty has been increased to $3,860 per year for a full-time employee who benefits from a tax credit!

Will the IRS enforce these penalties?

Yes!!! The I.R.S has made it clear that it will not waive the penalties demanded by the ACA employer. A significant number of employers who did not complete the required forms with the IRS in 2015 received letter 226J, also known as the "penalty letter" from the IRS. Here are some tips on what to do if you have one. And don't forget to respond within 30 days! After carefully sending your response to Letter 226J, the IRS will respond with Letter 227. There is no doubt that the penalties will continue to come.

What Should Employers Do Now?

For 2020

In fiscal 2020 (and beyond), employers should continue to:

  • Actively manage employee eligibility throughout the calendar year.

  • Provides affordable coverage, which is the minimum amount for all eligible full-time employees.

  • Send and deliver the correct and complete 1094-C and 1095-C forms on time.

For 2021

Also, schedule ACA reports for 2021

For now, we expect the relationship to continue through 2021 and possibly beyond. Make sure you have the systems and processes in place to do it accurately and efficiently.

Note that two main changes have been made to the ACA that affect employers:

  • Health insurance tax is back for 2020: This "health insurance provider fee" applies to health insurers based on the premiums they apply; most likely, this cost will be passed on to consumers. It was suspended in 2017, came back in 2018, suspended in 2019, and returned in 2020. But the latest news indicates that the revocation will take effect again in 2021 - good news for employers who buy insurance because it most likely is to mitigate the insurance premium Increases until 2021 renewals.

  • The Cadillac tax has been postponed for an additional two years until 2022: This unpopular and expensive health coverage tax (40% coverage tax above specified limits) has already been phased out and is being phased out again. Take a break, but start thinking about cost-cutting strategies to avoid this tax when it goes into effect.



Pat Raskob
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