ACA Compliance Guide for Employers

Navigating ACA Compliance

The ACA’s main employer requirements center around an offered plan’s characteristics, how the employer informs their workers about the plan, and how the employer reports plan information to the IRS.

ACA Plan Requirements

The Employer Mandate’s core plan requirements deal with the affordability and value of an employer-sponsored plan, as well as the quantity of full-time employees it covers.

• Affordable: For 2025 calendar year plans, the relative cost of the plan's least expensive offering(s) can't exceed 9.02% of an employee's total household income. In other words, if an employee has to spend more than 9.02% of their household's total income on the plan's benefits, the plan isn't affordable.
  
• Valuable: The minimum value a plan must provide to employees is at least 60% of the employee's expected medical costs for that year.
  
• Widely Offered: Employers must offer the plan to at least 95% of their full-time staff (and their dependents) for that plan to provide the minimum essential coverage the ACA requires.

ACA Safe Harbors

Even the most meticulous organizations can't know exactly how much income an entire household earns in a single year. To help employers guarantee they meet ACA requirements, the law allows for the use of specific safe harbors when calculating a plan's affordability.

ACA Notification Requirements

After piecing together an ACA-compliant plan, ALEs must next inform their employees about that plan, including its availability, benefits, and modifications. Generally, ALEs must provide this information to all employees within 14 days of their hiring, during annual Open Enrollment periods, and whenever an employee asks for it.   

• Summary of Benefits Coverage (SBC): This is a general explanation of the plan's costs and benefits that must be provided to eligible employees and dependents during Open Enrollment.
  
• Notice of Plan Change(s): Employers must give at least 60 days notice before making substantial changes (e.g., increases to monthly premiums or new network providers) to a plan's offerings.
  
• Notice of Healthcare Marketplace: Employers also must give information about available health insurance marketplace(s) and any corresponding premium tax credits.

ACA Reporting Requirements

To both prove their compliance and meet ACA filing obligations, ALEs must annually report information about their workforces and offered plans by submitting Forms 1094-C and 1095-C. ALEs can choose to file these forms in print or electronically, though if they have 10 or more returns, they must file them electronically. The IRS also instructs ALEs to keep a copy of the forms (or be able to recreate them) for at least three years.

• Form 1094-C: Summarizes all Form 1095-C information an employer provides, as well as an employer's workforce data, whether the employer is eligible for any financial relief, etc. ALEs must submit this form to the IRS and file it via mail by February 28, 2025, or electronically by March 31, 2025.
  
  
• Form 1095-C: Reports any employer-offered health insurance benefits an employee received each month of the prior year. ALEs must submit a copy to the IRS along with the organization's Form 1094-C.
  
  Beginning with tax year 2024, the Paperwork Burden Reduction Act (PBRA) states employers aren’t required to provide employees with a copy of this form unless those employees specifically request one, provided those employees are informed of the option to make said request under the Employer Reporting Improvement Act (ERIA).
  
  When requested, employers may provide an electronic copy of the form by January 31 or 30 days after the request is submitted, whichever is later. Furthermore, IRS Notice 2025-15 provides additional instructions on the alternative methods employers may use to furnish the form.

ACA Noncompliance Penalties

Aside from failing to meet the IRS' reporting deadlines, ALEs can also face penalties if their plans don’t meet the other Employer Mandate standards. This is most noticeable if a full-time employee who’s offered their ALE’s plan applies for and receives a healthcare marketplace premium tax credit.

Theoretically, an ACA-compliant plan should prevent enrolled employees from qualifying for such credits. So, if a full-time employee applies for marketplace coverage and receives a credit, it could trigger scrutiny into whether the ALE's plan meets the ACA’s affordability requirements.

*For 2025 violations; this is a decrease from the 2024 amount ($2,970).
**Calculated each month for which there's a violation.

ACA Compliance Assistance

ACA compliance is both complex and potentially costly. So why take the risk of accidentally reporting the wrong data or forgetting to share plan information with your employees? Yes, healthcare compliance is a dry, daunting subject, but with the right tools, anyone can navigate the ACA's twists and turns.

Paylocity's Compliance Dashboard can help eliminate ACA-induced stress by keeping you up to date on the ever-changing legal landscape while giving you a bird's eye view of what you need to do to avoid penalties. In other words, that intimidating medical textbook becomes a simple, user-friendly instruction manual.

Request a demo today to see firsthand how these tools can empower you to efficiently monitor your ACA status and ensure you're always on the right track.