ACA Compliance for Small Businesses
The Affordable Care Act was enacted to reduce health care costs, improve access to health insurance for everyone and provide patient protections on several levels. ACA wrought many changes among businesses, but none carried greater impact than mandating access to health insurance, defining how businesses should comply with the guidelines.
Impact on Benefits for Small Business Employees
Under ACA, the employer mandate required coverage as follows:
- Businesses with 100 or more full-time employees, or FTE, were required to provide health insurance to at least 70 percent of FTEs by 2015. By 2016, coverage should include 90 percent of FTEs.
- Businesses with 50 to 99 employees were mandated to provide coverage to at full-time employees starting in 2016.
- Small businesses with 25 FTEs with wages capped at $50,000 annually qualified to receive tax credits and reduce health insurance costs through the ACA’s Small Business Health Options Program or SHOP. Businesses may qualify for up to a 50 percent reduction on their share of insurance premiums.
Operational Challenges of ACA Compliance
ACA guidelines rely heavily on payroll data. Companies are driven to track, document and monitor time and attendance records more stringently to comply with ACA compliance mandates. The law’s compliance guidelines depend on the number of full time employees and the actual hours worked to assess eligibility. This means that businesses must track and document staffing hours to make sure that those who are eligible for employer-provided health insurance will be given an option to opt in or out. Records must be maintained either way to demonstrate compliance with health legislation guidelines.
It is good practice for employers to review time and attendance, benefits and payroll records especially within the defined look back period. Records for employees working variable hours should also be monitored to make sure that they remain within the part-time threshold. Part-time, temporary or seasonal employees may not qualify for FTE benefits such as health insurance.
Companies that maintain different ledgers for each employee classification should make sure that employees transitioning from part-time to full-time work are acknowledged. Time and attendance records should be accurate and up to date. Make sure that benefits are granted as soon as employees become eligible as FTEs to avoid sanctions on the business.
Managing Compliance Requirements
ACA guidelines have made it imperative to keep accurate records. Companies that receive a federal subsidy to cover part or all of the employers’ share of costs may be asked by the Internal Revenue Service to present their payroll records.
This being the case, businesses should consider outsourcing this part of their back office operations to a third party specifically one with experience in this field. Payroll records can be streamlined and compiled to highlight the portions that are relevant to compliance issues. When it comes to health care subsidies, businesses can maximize benefits by providing clear and accurate data. On the flipside, should the IRS require proof of eligibility for subsidies, accurate payroll records should suffice to prove ACA compliance.