Believing rumors about the Affordable Care Act (ACA) can be costly for grocers. For example, many companies mistakenly believed that ACA wouldn’t be enforced, but the IRS has recently started sending out penalty letters for the 2015 tax year. We’ve heard of penalties ranging from $40,000 to upwards of $2 million.
Three common ACA rumors
Here are three common ACA rumors our clients often ask about. Accepting them can increase your risk of significant financial penalties for ACA non-compliance.
- Elimination of the individual mandate effectively repealed ACA.
- ACA penalties will not be enforced.
- Filing 1094/1095 forms at year-end fulfills ACA reporting requirements.
Debunking the rumors
Here are the facts so you don’t fall into the trap of the three common ACA rumors.
Costly ACA rumor No. 1: Elimination of the individual mandate effectively repealed ACA. My business does not have to comply with ACA since the individual mandate was eliminated with the tax bill passed in December 2017.
Employers are still required to offer health insurance and perform ACA reporting IF…they have “an average of at least 50 full-time employees (including full-time equivalent) on business days during the preceding calendar year.”1 These employers face significant penalties if they don’t follow ACA laws.
The elimination of the Individual Mandate starting in 2019 does not do away with the ACA laws specific to these employers.
Costly ACA rumor No. 2: ACA penalties will not be enforced. Many employers have believed ACA penalties will not be enforced because Republicans hold the presidency, as well as a majority in the House and Senate.
ACA penalties for employer non-compliance have been enforced retroactively starting in late 2017 for the 2015 tax year. And the penalties we’ve heard about can be significant—upwards of $2 million.
Too many times to count, employers and benefits brokers have said to me, “ACA will not be enforced.” Consequently, many employers ignored their ACA obligations. They didn’t offer health insurance and didn’t meet the IRS reporting requirements because 1) Republicans currently control our federal government and 2) they weren’t receiving penalty letters for non-compliance.
In late 2017 the IRS began sending out Letter 226-J for 2015 penalties. The letter is the initial letter issued to applicable large employers to notify them that they may be liable for a penalty. Employers who received these are assumed guilty by the IRS and must refute or pay the penalty. Letters relating to 2015 are still being issued. Once 2015 letters have been completed, the IRS will begin on 2016 and so forth. At a recent industry conference, I heard about penalties of more than $2 million.
Costly ACA Rumor No. 3: Filing 1094/1095 forms fulfills ACA requirements. Many employers believe their only requirements are 1) to offer insurance to full-time employees and 2) then file 1095/1094 forms at year end.
Businesses are often surprised to find out there’s much more involved in meeting ACA’s two broad requirements: 1) offer insurance to full-time employees and 2) perform the year-end reporting. Meeting requirements for variable employees is just one example of how complex ACA requirements can get. If you employ variable hour workers, throughout the year you must a) track their hours, b) determine when they meet the threshold to be offered health insurance and c) offer them insurance when they meet this threshold. Failure to do so could mean significant penalties.
Chris Cooley is co-founder of MyHRConcierge and SMB Benefits Advisors. Clients rely on him for ACA compliance, COBRACompli, employee handbooks, HR compliance and administration, workforce management and benefits advisory solutions. Cooley’s companies specialize in helping small to mid-sized grocers throughout the U.S. Chris can be reached at 855-538-6947, ext. 108 or at firstname.lastname@example.org.
Additional resource: IRS questions and answers on reporting of offers of health insurance coverage by employers: https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-reporting-of-offers-of-health-insurance-coverage-by-employers-section-6056#Who%20is%20Required%20to%20Report