The Affordable Care Act (ACA) has gone through a number of changes since its enactment in March 2010. The comprehensive health care reform law had three primary goals upon implementation.
The first was to make healthcare more affordable. This was achieved by providing individuals with subsidies that reduce the costs for households with income that fell between 100 percent and 400 percent of the poverty level. The law also aimed to expand the Medicaid program to cover all adults that fell below 138 percent of the poverty level. It also helped support innovative medical care delivery methods, which in turn lowered the cost of healthcare.
In 2020, you can expect certain changes to the Affordable Care Act that could impact your business. To prevent costly penalties, review and follow this 2020 ACA compliance checklist.
What is ACA Compliance?
If you are an employer in the United States that has 50 or more full-time employees, you must continue to comply with the Affordable Care Act. This involves filing forms 1095-C, a year-end summary of payroll data for full-time employees, with the IRS each year. To stay compliant with 2020 ACA requirements, there are certain activities that employees must do during the year.
5 Ways to Ensure ACA Compliance in 2020
1. Review Your Plan’s Cost Sharing Limits
Start by reviewing your health plan’s cost sharing limits. For 2020, the out-of-pocket maximum to ensure that you are in compliance with ACA limits is $8,150 for self-only coverage and $16,300 for family coverage. For those with an HSA-compatible high-deductible health plan (HDHP), your maximum out-of-pocket has to fall below the ACA limit. In 2020, the out-of-pocket maximum limit for an HDHP is $6,900 for self-only coverage and $13,800 for family coverage. Also, check to see if the health plan uses more than one service provider to administer employee benefits. If so, make sure that the plan will properly manage all claims for benefits across service providers.
2. Check Your Current Affordability of Coverage
Business owners should also take the time to check the current affordability of coverage. Based on regulations set under the Affordable Care Act, any applicable employer’s health coverage should be thought of as ‘affordable’ if employee contributions to the plan fall below 9.5 percent of the worker’s household income for the taxable year. Take note of adjustments each year as the adjusted percent is 9.78 percent for 2020. If you find that your health coverage is not considered affordable under the ACA, be sure to make the proper modifications to your plan.
3. Avoid Penalties for ACA Reporting Violations
Failure to comply with ACA regulations can result in hefty penalties for businesses. Certain employers are mandated to comply with Section 6055 or 6056 reporting requirements. If an employer does not comply, they may be subject to penalties for failing to file correct information returns or for failing to furnish correct payee statements. The penalty is based on whether or not the employer corrects their mistake within a certain amount of time, as well as how many violations were found. The penalty for an ACA reporting violation can range from $50 to $550 per violation.
4. Stay Under the Limit for Health FSA Contributions
Employers must also remember to remain under the limit for health FSA contributions. For the 2020 calendar year, individuals are able to contribute up to $2,750 to a health care FSA, as well as a limited purpose FSA. This is a $50 increase from 2019 when the limit was $2,700. With this information in mind, you will want to confirm that your health FSA does not allow your employees to make any pre-tax contributions that exceed the 2020 limit. If your open enrollment occurred before the 2020 limit was announced, you had the right to use the 2019 limit instead to ensure compliance.
5. Hire a PEO Consultant
Professional employer organizations (PEOs) work with small businesses to help them manage a wide range of tasks, such as payroll taxes, employee benefits and various other human resources functions and administrative tasks. What some businesses do not realize is that a PEO consultant can actually help a business maintain ACA compliance. Each year ACA compliance regulations can change, making it difficult for employers to keep up. This can result in unnecessary penalties for businesses. When you hire a PEO consultant, you can rest easy knowing that your business is always compliant with healthcare standards.
Reach Out to the Experienced PEO Consulting Firm
Employers affected by the Affordable Care Act must take the extra measures to make sure that their business stays compliant. Want to learn more about ACA compliance or does your small business need help staying compliant? The experienced PEO consultants at BenefitCorp can help. Reach out to BenefitCorp today to learn more about our PEO consulting services or any of our other business consulting services.