Help Your C-Suite Understand ACA Penalties

Helping your C-Suite understand the importance of ACA laws and the risk of potential penalties can be a challenge. Here are some strategies to help.

To say that the HR profession can be challenging would be an understatement. Onboarding and offboarding employees, supporting perks and wellness initiatives, and ensuring equity in compensation are all stressful tasks. Many HR professionals are feeling extra pressure these days due to the management of the health reform mandate. HR professionals simply cannot afford to ignore the Affordable Care Act (ACA) regulations. The stakes are higher now, the costs for failure are greater, and maintaining your ACA program is more complicated. Support from the C-suite is necessary, and it all starts with a conversation.


The advent of real penalties

Employers who have more than 50 full-time or full-time equivalent employees are required to offer healthcare coverage to at least 95 percent of their employees. In some cases, companies have not followed these regulations or did not complete and submit their IRS forms accurately or on time. Those who fail to comply face potential penalties, and this infographic shows how quickly they can mount.

Yet while HR professionals are well aware of these ramifications, many C-suite executives are not. The following strategies can assist you in having a crucial discussion with your C-suite if this is true in your organization.


Showing your C-Suite the numbers

  • Penalties or IRS audits cannot be prevented by good faith effort alone anymore. You risk receiving a penalty assessment if you do not comply.

  • When you talk to your C-suite executives, show them the numbers that dictate the situation for 2022.

  • Companies with at least 50 full-time or full-time equivalent employees must offer medical benefits to at least 95 percent of their full-time employees. Failure to do so may lead to a fine of $2,750 per employee. This penalty is assessed on your total full time, ACA benefits eligible employee count, less 30 employees, not just those that were not offered coverage. 

  • The premium must not exceed 9.61 percent of household income. Additionally, the coverage must meet minimum value requirements, covering more than 60 percent of medical expenses. A $4,120 fine will be assessed for a full-time employee who does not receive an affordable offer of coverage through their employer, and subsequently receives coverage through the Marketplace and is determined eligible for a subsidy. 

  • By March 2, 2023, recipients must receive their 1095-C forms. An undelivered form may result in a $280 fine per form that is not delivered on time, and a violation committed intentionally could yield a fine of $570.

  • By March 31, 2023, Forms 1094/1095 must be filed electronically with the IRS. A failure to comply with this requirement may result in a fine of $280 per form, and a violation committed intentionally could yield a fine of $570. This second clause is essential; make sure your C-suite understands the difference.

Highlight that these fines are per employee, and while the above penalties represent annual amounts, they are assessed monthly, so not meeting any of these requirements for even a partial year can still result in significant penalties. You can also show them real-world examples of possible scenarios involving your own company so they can truly understand their potential loss if guidelines aren't followed. 


Showing your C-suite the options

Once your executives realize the potential risk, lay out your ACA initiatives, and reinforce the importance of an automated ACA solution that supports helping you:

  • Make coverage offers per ACA eligibility, so you know to whom and when to offer them.

  • Identify the most cost-effective household income and affordability thresholds under the Federal Poverty Line, W2 Compensation, and Rate of Pay.

  • Eliminate manual data entry of "Offers of Coverage".

  • Make sure your ACA program is managed monthly.

  • Submit reporting accurately and timely, according to IRS regulations and states with their own individual health insurance mandates.

  • Make form corrections where required, and deliver to recipients.

Equifax can help you take each of these steps to help reduce your penalty risk and offer opportunities for success within ACA guidelines. We collect and distribute ACA-related information to help minimize additional paperwork and risk of penalties down the road so your organization will more in the know regarding ACA regulations. Download the Affordable Care Act - C-Suite Info sheet for more information.