We recently held a webinar regarding changes pertinent to the upcoming ACA reporting season. After receiving numerous questions from attendees during the session, we thought it best to compile and share them for your reference.
See below the most common ACA compliance and reporting questions heading into 2024.
What is a PTC?
A PTC stands for (Premium Tax Credit). It is a credit that an individual can obtain to lower their monthly insurance payment when enrolled in coverage on either a state exchange or the federal health insurance marketplace.
PTCs are also the trigger for the IRS to identify ACA non-compliance within an organization.
How will an employer know if an employee receives a PTC?
The only way an employer will know if an employee receives a PTC is if the employee volunteers this information to you, or you receive a penalty Letter 226J.
The Letter 226J penalty letter will detail all employees who have ever received a PTC and for which months associated with it triggered the penalty.
What happens if an employee receives a PTC? Will my organization get a penalty?
Not necessarily. The fact that your employee received a PTC does not mean you will receive a penalty for it. What it does mean, however, is that the IRS is going to check how you coded their corresponding 1095-C form.
The agency will look at that coding and assess: Is this coding sufficient to avoid a B penalty? Was the employee made an offer of coverage that meets Minimum Value (MV) and was it affordable under one of the three safe harbors? Were they a part-time employee?
These are the types of things the IRS will look for when evaluating the employee in question’s 1095-C form.
Does the family glitch impact IRS ACA reporting?
The “family glitch” doesn’t directly impact employer reporting–it might impact the number of potential PTCs though. The PTC is just a trigger at the 95% threshold. If you don’t offer coverage to at least 95% of your full-time staff, then you could potentially be exposed to a 4980H(a) penalty.
This is why it’s critical to ensure you’re accurately determining employee full-time status and extending offers accordingly. Overstating your full-time counts could significantly increase the stated 4980H(a) penalty amount. We observed this as a common reason why organizations receive ACA penalties from the IRS in our latest research report.
If there is no PTC-listed individual then there will be no penalty assessed. With the 49080H(b) penalty, you could have 1,000 employees and not offer them Minimum Essential Coverage (MEC).
If none of the employees go on the exchange and try to get a PTC, then your penalty risk is zero. They assess the penalty based on an employee receiving a PTC that triggers all of those other factors.
Why is ACA affordability so low for 2024? Does it have anything to do with the Inflation Reduction Act?
Yes. The Inflation Reduction Act capped the maximum contribution towards premiums for exchange plans at 8.5% of an employee’s income.
Even though the act was passed in 2021, the affordability percentage for determining employee contributions has continued to decline. And for the first time since its passage, the affordability threshold is lower than the 8.5% cap.
If we offer an HRA are we required to use one of the HRA offer of coverage codes?
Not necessarily. All of the new HRA offer codes identify the ZIP code safe harbor. The IRS has made it clear that as long as it meets a specific threshold, the HRA offers coverage that meets MEC and MV. If you use the ZIP code safe harbors to prove affordability, then you have to use B codes.
Do all employees require a 1095-C or only full-time?
You do not need to send and file 1095-C forms for all employees. You do need to send and file for any employee who was full-time for one or more months during the calendar year.
How do you code an employee who waives insurance?
You would indicate that you made an offer of coverage on their 1095-C form, and there are several codes for that. The fact that the employee waived the insurance is not necessarily relevant to the IRS. It must be correctly indicated that the offer of coverage met MV and the affordability safe harbors.
What are the filing requirements for a California ALE employer that does not offer health insurance?
Your filing requirements are triggered by your Applicable Large Employer (ALE) status, not whether you offered your employees coverage. You would have the same requirements as other ALEs that offered plans.
If a company is brand new this year and has roughly 100 employees for the majority of 2023, will it have to report in 2024?
While the ALE calculator is generally made looking at the prior year, a new employer would be considered an ALE for 2023 if it reasonably expects to employ, and does employ, an average of at least 50 full-time employees, including full-time equivalent employees on business days during the current calendar year.
Are there late penalties for filing late ACA information?
There can be. We have had several new clients receive late filing penalty letters that referenced the date where corrections were filed vs. the original filing date. These penalties are typically issued via Letter 5005-A and 972CG.
Who should be handling the ACA filing for the company?
Employers doing it in-house conduct it through HR. Some payroll vendors or HRIS platforms do this as an add-on. Trusaic does it on your behalf. It depends on your internal comfort level in tracking coverage offerings and being able to complete the necessary forms for filing. Organizations with high rates of turnover or seasonal employees usually find it easier to file with a third party as these workforce nuances make managing ACA compliance increasingly more difficult.
Get help with ACA reporting
With 2024 right around the corner and ACA penalties for failing to complete filing and furnishing requirements, the stakes are high.
If your organization needs assistance with ACA compliance processes, including determining employee coverage eligibility, affordability calculations, coding, filing, furnishing, and IRS audit defense, contact Trusaic for assistance.
We’ve helped thousands of organizations, from small businesses to enterprise organizations, become 100% ACA compliant by managing all of the responsibilities for them. In addition, we’ve prevented over $1 billion in penalties for our clients.
To find out where most organizations struggle with ACA compliance and reporting, download our research report, The Challenge of ACA Compliance below.
To gain invaluable insights on penalty amounts, affordability percentages, filing deadlines, expert tips for responding to penalty notices, and proven strategies for minimizing IRS penalty risk, download the ACA 101 Toolkit.