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How does the Affordable Care Act (ACA) impact your business?

Avoid Costly Compliance Penalties by Partnering with a PEO

The Affordable Care Act (ACA) has changed the way employers or business owners purchase and offer insurance to their employees. Under the ACA, large employers (50 full-time or full-time equivalent employees or more) are required to offer affordable health insurance to their employees. Additionally, employers are required to offer minimum essential coverage to at least 95% of their full-time workforce and their dependents. This mandate also sets a minimum standard of coverage and affordability based on the nation’s poverty threshold year over year.

When offering coverage to employees, small to mid-sized business owners must also provide reporting back to the IRS to prove their participation within the ACA. This reporting is just as important as what they are offering their employees. In fact, employers must include the following:

  • Withholding and reporting an additional 0.9% on wages or compensation over $200,000
  • Reporting the value of health insurance coverage on a W-2
  • Filing an annual return, aka Form 1094-C, reporting whether or not you offered insurance and what coverage was offered
    • In addition, you must provide specific information if you choose to provide self-insured health coverage

If the Affordable Care Act was implemented years ago, why focus on compliance issues now?

First, some employers may have slacked during the pandemic in their reporting because of higher priorities or lack of support, which is more than understandable. Now is the time to ensure all documentation is up to date and you are offering the correct required coverage based on how many employees you have.

It is important to note that the Good Faith Transition Relief which gave employers reprieve from ACA penalty assessments in the past has unfortunately come to an end. 2020 was the final tax year to take advantage of this excuse.

Additionally, penalties are on the rise for business owners. Business owners who do not comply with providing affordable healthcare to their employees or do not report their offerings properly will be on the hook for higher penalties. Increased penalties for the 2022 tax year range from $2,750 (previously $2,700) per employee or $4,120 (previously $4,060).

What can business owners do to avoid ACA compliance penalties?

Compliance is a top priority for any organization, and for small-mid size business owners, non-compliance could be so detrimental that the business could close shop for good.

With respect to ACA, be sure that your reporting from the past few years is correct for all forms related to ACA and that you are accounting for all employees. It is also important to monitor your staff for regular changes to employee hours.

Trying to make sure HR duties including compliance and risk mitigation are taken care of is a full-time job for multiple people. By partnering with a PEO like PrestigePEO, your business will have a full team of support including someone who you can depend on for all your legal and regulatory requirements. And as a small-medium size business owner, staying on top of that employee monitoring will become increasingly complex as your business grows. Remember, the more employees, the greater your legal liability. Aside from ACA, a PEO can also ensure your regular state legal requirements including labor laws are always up to date and your employees are aware of any changes.

How does a PEO assist in offering employee benefits in accordance with ACA?

A PEO can help your business access employee benefits at highly competitive, affordable rates. A PEO’s ability to combine the purchasing power of all its clients leads to the best employee benefits options for you and your employees. As an employer, offering this coverage to your employees does not have to be daunting. In fact, PrestigePEO Benefits Specialists make it seamless to onboard your employees and you will receive transparent pricing, so you know exactly what you are paying for.

A PEO handles all HR management, tax, payroll, and any other administrative duties necessary on a daily, monthly, and annual basis. Our client-dedicated teams are constantly auditing their accounts to ensure accordance and legal responsibilities so there is little to no risk of costly penalties. By partnering with a PEO, you have full HR support for every item on your list.

Do not wait until next year to make any updates for your ACA requirements, and don’t wait any longer if you need help with your HR needs. If your business currently lacks a compliance department and you are unsure of what to offer in terms of benefits, consider partnering with a PEO for all your HR needs.  Not only does a PEO mitigate any compliance risk, but they can also offer guidance on every piece of HR management so you can focus on your business.