Tag Archives: Variable Hour Tracking

What are the ACA Reporting Penalties?

When an Applicable Large Employer (ALE) fails to comply with their ACA reporting requirement, they will then be subject to various penalties.  These penalties apply both for not providing forms timely to employees as well as not filing timely to the IRS.

The penalties are as follows:

  • Did you fail to file a return, and on-time?  The penalty will be $250 for each return up to a maximum of $3,000,000.
  • Did you fail to provide your employees with their statements, and on-time?  The penalty will be $250 for each return up to a maximum of $3,000,000.

If there ever is intentional disregard of the requirement to provide employee statements, the total penalties stand to be increased from the base fines listed above.
The waiver of penalty and special rules under section 6724 and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under section 6721 or 6722.

Payroll Vendor Doing ACA Reporting … MUST be HIPAA Compliant

For payroll companies performing ACA reporting, we are increasingly finding that they forgot one very important detail … HIPAA and HITECH Compliance.

The reason most payroll companies forget about this detail is that they normally work with employee specific information regarding payroll records.  For payroll record specific information, HIPAA privacy rules have an exception that allow for the data to not be considered Protected Health Information (PHI).

When it comes to ACA Reporting however, there is no similar exception.


The information that is necessary to complete ACA reporting (list here)  contains employee Social Security Numbers that are connected with medical plan enrollment details.  For this reason, the data necessary to complete ACA Reporting must include PHI and thus the HIPAA and HITECH Compliance rules come into effect.

These rules require many various things, including the following:

  • Employers must enter into a Business Associate Agreement with any vendor they share PHI to in order to complete ACA reporting.
  • Once the vendor (payroll company in this case) comes into contact with the PHI, they have responsibilities to encrypt and safeguard this information.
  • Any communication that includes PHI (emails, etc) must be sent encrypted in order to ensure compliance
  • Once the payroll company receives the data, they must maintain all other HIPAA and HITECH compliance items regarding how the data is accessed and stored.

….So one quick question you can ask yourself is, “Did I sign a Business Associate Agreement with the payroll company I hired to do my Affordable Care Act Reporting?”.  If the answer to that is No, then you might have a problem.


This link is a blog article from the American Institute of CPAs that you might find helpful on this topic. (link here)


If you are curious how we handle HIPAA Compliance for our clients, you can learn more here.

All Large Employers MUST Complete ACA Reporting (Even Fully Insured Groups)

This comes as a surprise to many, but YES – if you are an employer with 50+ employees (or full time equivalent employees), you must complete ACA Reporting to the IRS (forms 1094 and 1095).

But I’m Fully Insured . . . My insurance carrier will take care of this right?No!

You might have thought that your insurance carrier was going to take care of this, but they only report the portion that they are required to report as an insurance carrier.  Employers still have additional responsibilities.  


The easiest way to think about this is by considering what the Affordable Care Act accomplished:

  • Individual Mandate – all US citizens must now have health insurance or pay a penalty
  • Employer Mandate – all large employers (50+ employees) must offer coverage and that coverage must be affordable
  • The IRS is in charge of making sure these things happen.

So how does the IRS make sure that an individual did have health insurance and doesn’t owe an individual tax penalty?

This is accomplished through the IRS receiving specific forms from the various places that an individual could have coverage:

  • The exchanges send the IRS the ‘A’ Forms (1095A)
  • The insurance carriers send the ‘B’ Forms (1095B)
  • And self insured employers must report everyone covered under their plan for the year using the ‘C’ Forms (part 3 of 1095C)

How does the IRS make sure each large employer (a) offered coverage and (b) that the coverage was affordable?

This is accomplished through the IRS receiving a completed form 1095 by ALL LARGE EMPLOYERS.  Specifically, part 2 of form 1095C is used to accomplish this task.

So as you can see this is not something that will be fulfilled by insurance carriers, and the penalties for not filing are substantial.  (IRS Fines)

Have questions?  Contact us from the support tab.  Thanks!