Many organizations find ACA compliance to be challenging and time-consuming, leading to potential penalties from the IRS. But while almost all organizations need to comply with reporting requirements (those that have 50 or more full-time or FTE employees), not all are equally at risk.
In fact, our research has revealed that some industries are more at risk than others. But first, a little background.
ACA’s Employer Mandate
ACA’s employer mandate requires employers with 50 or more full-time or FTE employees to provide affordable healthcare coverage for full-time employees and their dependents, until dependents turn 26—or face the potential of penalties. All employees who work an average of 30 hours a week are considered to be full time. Seasonal and those the company considers to be part time may also fall into this mix if they work an average of 30 hours a week.
Employers are required to file annual reports including information on all employees who were offered coverage, who accepted coverage, and how much coverage cost them. They must report the number of employees, by month, for the calendar year and each full-time employee’s share of coverage costs for the lowest-cost, minimum-value plan offered. In addition, they must provide names, addresses, and Social Security numbers for all full-time employees, along with the months they were covered.
Compliance Burdens
We knew, intuitively, that ACA Employer Mandate compliance would be onerous for some companies. But we didn’t know exactly how onerous, or if some companies were more burdened than others.
There’s not a lot of research on the issue, so we took steps to close these knowledge gaps through a 2023 survey that gathered data from 244 ACA compliance professionals. We supplemented that quantitative data with qualitative inputs from focus groups to help further our understanding of the issues these companies face.
What we found is, perhaps, not too surprising—more than half (52.5%) of respondents indicated that compliance was “somewhat burdensome”—almost 21% felt it is “overly burdensome.” Only 27% indicated that they did not feel compliance was burdensome. In fact, almost 70% of respondents indicated that they spend more than 80 hours a year on ACA compliance.
Industries Most at Risk
In general, those industries that have larger numbers of low-paid, variable hour employees, and low participation in company sponsored health plans are most at risk of being found non-compliant. These industries include home healthcare, staffing, restaurant, and construction. Organizations within these industries have been shocked to receive ACA penalty notices from the IRS that are in the millions of dollars.”
Our research yielded similar results. We found that the industries most likely to receive ACA penalty letters were:
- Agriculture, forestry, fishing, and hunting
- Accommodation, and food services
- Educational services
- Health care, and social assistance
And then we asked “why”?
The Factors Prompting Potential Penalties
The factors most likely to lead to penalties, according to our research, are practical ones. For instance:
- The sheer number of variable hour workers
- Many low-wage workers, raising issues around affordability and the potential for workers to turn down offers of insurance
- High turnover. In industries like fast food, for instance, an employee might be hired, quit, and be rehired in a matter of months
- The states where organizations operate—some have reporting requirements over and above ACA reporting requirements
- Employer size. Those with 500+ employees are almost six times more likely to receive letters
A common theme related to these factors is the level of effort required to pull together mandated data. More employees, more variability in staffing, higher turnover, all increase compliance burdens and also impact the thoroughness and accuracy of that data.
We’ve seen that employers in accommodation and food services are at particularly high risk. They have long struggled to gather accurate data. There are other nuances that impact this risk. Restaurants, for instance, may have multiple locations owned by different people each reporting differently.
ACA compliance also represents high risk for companies in agriculture, forestry, fishing, and hunting where the seasonality of work makes it hard to track hours as required to be ACA-compliant.
Mitigating Risk
While our data shows that some industries are more impacted than others, all companies with greater than 50 full time employees must comply with the ACA Employer Mandate. To help minimize risk, we recommend:
- Finding a good source of advice
- Educating leaders about ACA penalty risk and the challenges of compliance
- Being sure any software used for compliance can handle your needs
- Be clear about the difference in reporting risk (e.g. filing correctly and on time), and compliance (e.g. offering plans to 95% of your full-time employees). Both must be done
- Be sure to execute your plan in a timely and compliant manner
The risk is real, but help is available. Trusaic can help you get your arms around both compliance and reporting. Learn more.
