5 things to do after you receive an ACA compliance violation letter

5 Ways to Navigate ACA Compliance in your Business

Timothy Lozier Affordable Care Act [ACA] Leave a Comment

The Affordable Care Act (ACA) has been getting quite a bit of attention lately in the news, mostly around the legality and future of the program.  While healthcare remains an important debate in Washington, down at the “ground level” it is still very much a reality.  ACA is still the rule of the land, and companies that are over 50 Full Time Employees (FTE) need to adhere to ACA Compliance laws or face potential fines from the IRS.

There is a misconception on how the IRS actually determines who’s in compliance versus the accuracy of that information.  Let’s look at how ACA fines can happen, the common missteps to remedying compliance letters, and how to navigate ACA.  We’ll also look at how a workforce management solution can help give you visibility and control over ACA and your operations.


How the Government determines whether ACA has been violated

Given the number and scope of businesses that fall under the ACA, the IRS has a fairly simplistic method of determining whether a company is out of compliance.  When assessing a company’s compliance, the IRS will look at the number of employees that went to the ACA Marketplace and identified their coverage (or waived), and then cross reference this with who they listed as their employer.  They will then match this to the recorded employee count provided by that employer to see if there is a violation.  This is a basic calculation that doesn’t take into account the nuances of your operation, such as:

  • New hires: if a new FTE is under 91 days employed, an employer cannot be penalized for this employee.
  • How Benefits Were Offered: If benefits were offered through somewhere other than the marketplace, this can skew the results.
  • Waived Coverage: ACA only has to be offered, not enrolled.  In fact statistically 98% of employees often waive coverage.  IF the IRS doesn’t have this information, there will be a discrepancy.

The takeaway is that, if you receive a letter from the IRS stating that you violated ACA, and owe a fine – stop and don’t panic.  The initial letter may be able to be remedied via a more granular exploration of your operation – one that that IRS would not have taken into account.

ACA Compliance and Waived Coverage

Over the past 4 years, the majority of employees offered benefits will waive, which can present a challenge for employers.


Todd Bellistri, President and CEO of August Benefits is a seasoned professional specializing in ACA compliance. He provides some key advice when receiving an IRS Letter of an ACA Violation.

  1. DO NOT PANIC! The IRS has sent out thousands of letters – many of the letters are the result of inaccurate or poor submissions on the part of the employer (or 3rd party ACA provider). You now have an opportunity to respond!
  2. Request an “additional 30-day extension of time to respond”, by calling the IRS contact person printed on the letter. Be sure to document your request. The additional time will allow ample opportunity for review and formulation of an appropriate response.
  3. Furnish a copy of all pages of the IRS letter to your ACA credentialed service team for review. Your service team will be in a position to understand all aspects of the letter and assist with an accurate response.
  4. Respond in a timely manner to the IRS letter – retain copies of all correspondence.
What to Do if you get a Letter Citing an ACA Compliance Violation

Again, don’t panic.  Too often, there is an initially gut reaction to a citation and fine that can cause a business to panic and figure out how to pay it off.  Truth is, you are better off investing time with an ACA compliance professional to review your records, conduct an audit, and negotiate the fine (or eliminate it altogether).  There are workforce management solution providers that deal specifically in Affordable Care Act, which is a little more specific than a labor attorney; they spend all their time on ACA, as opposed to a more generalized view from a labor attorney.

Here’s some quick tips on what the best approach is in dealing with an ACA Letter:

  1. Hire an ACA Compliance consultant: These consultants have a detailed working knowledge of how the IRS calculates compliance violations, and can help you review the nature of the violation and it’s accuracy.
  2. Understand the Rules: Having someone work with you on this can help, but there are some rules under ACA that can pose a risk.  For example, there is the concept of a “Calculated” FTE versus a “designated” FTE.  You may have only designated 25 FTEs in your business, but, because of hours worked over a period of time, you may in fact have more than 25 employees that have “calculated” into a FTE category, and are subsequently eligible under ACA.  Alternatively, you will want to keep a record of those that accept coverage, versus those that waive coverage.  You need only offer benefits to your FTEs;  if they waive coverage, then you are still in compliance.  However, you need to keep a record of this.
  3. Conduct an Audit of your Benefits Program: This is where having a workforce management solution in place with detailed records of ACA eligibility, coverage options and records of waived versus taken coverage will provide added benefit.  An ACA consultant can help you with this.
  4. Negotiate the fine: “Everything is negotiable” – most often these fines are dramatically reduced, or even eliminated, when you have the right tools and data in place to prove you are in compliance.  The key is to ensure you are keeping track of your employees’ benefits, eligibility and meeting the minimum requirements of the Act.
  5. Get Visibility and Control through a Platform: As you grow and scale the business, it becomes very difficult to manage ACA, among other things, in a manual way.  Look for a workforce management solution that has the ability to track all aspects of the workforce, including ACA compliance, in a single holistic platform.

The ACA, or “ObamaCare”, is a hotly debated law that many will be talking about in the coming years.  However, that doesn’t mean it’s any less real.  It’s the law of the land and the IRS is continually going after companies off all sizes to assess ACA compliance violations.  Small and large alike, there is a real risk to facing fines if you are not meeting the minimum standard.  However, that doesn’t mean these risks can’t effectively be mitigated.  With visibility into your employees, expertise in understanding the rules and risks, and a workforce management solution to tie it all together, you can effectively gain control over your operation, and focus on what matters most – Running your business.


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