Understanding Employer Benefits Compliance: Why It Matters for Your Business (PSAI)

Understanding Employer Benefits Compliance: Why It Matters for Your Business

Offering employee benefits is key to keeping your workforce happy, but if your business is considered an Applicable Large Employer (ALE) under the Affordable Care Act (ACA), there are legal requirements you must meet. Non-compliance can lead to hefty penalties, so it’s crucial to understand these rules and keep your benefits program up to date.

What is an Applicable Large Employer (ALE)?

An ALE is any business with 50 or more full-time equivalent (FTE) employees. Even if you don’t have 50 full-time staff, part-time employees’ hours can add up to the equivalent, putting you in the ALE category. If you meet this threshold, you must follow certain ACA regulations.

ACA Compliance for ALEs

As an ALE, you must offer health insurance that meets specific ACA standards to your full-time employees (those working 30+ hours per week). If you don’t, your business could face penalties, known as Employer Shared Responsibility Payments (ESRP).

Key ACA Requirements: MEC and MVP

Minimum Essential Coverage (MEC): Basic health insurance that meets the ACA’s minimum standards.
Minimum Value Plan (MVP): A plan covering at least 60% of total costs and providing substantial coverage for hospital and doctor services.

Failing to offer these plans to at least 95% of your full-time employees can result in penalties, especially if an employee gets a tax credit for purchasing ACA marketplace insurance.

ACA Safe Harbors and Affordability

The ACA requires that your health plan is affordable—defined as not costing employees more than 9.83% of their household income. Since employers typically don’t know household incomes, the ACA offers safe harbors to determine affordability, like using W-2 wages or federal poverty line guidelines.

Annual Filings and Compliance

To stay compliant, ALEs must complete several annual filings:

Form 5500: For companies with 100+ employees offering health plans.
Forms 1095-C and 1094-C: To report health coverage to both employees and the IRS.
105(h) Non-Discrimination Testing: For self-insured health plans, ensuring fair treatment for all employees.

Staying Compliant

Staying on top of these regulations is essential to avoid penalties. If you’re unsure about your ALE status or if your benefits program meets ACA requirements, consult your benefits broker. They can help you ensure your offerings are compliant, affordable, and valuable to your employees.

Make sure your benefits are in line with ACA rules—reach out to your broker today!