aca sign discussing the risks of noncompliance, help from ACA compliance software

ACA Compliance: The Risks of Non-Compliance

Timothy Lozier Events Leave a Comment

Healthcare and medical coverage is a benefit for employees, provides them with the level of care they need, and give them affordable options when seeking medical care. With the Affordable Care Act (ACA) enacted in 2010, companies employing more than 50 Full Time Employees (FTE) are required to provide some form of medical insurance for employees. This was designed to ensure that employees have access to some level of healthcare from their employer. The provision also requires employers to report healthcare coverage to the Internal Revenue Service annually. While there are many other provisions to the law, these are the major areas that companies often fall into challenges with maintaining ACA Compliance.


For many companies, ACA Compliance is not usually top-of-mind – especially when you are busy running an operation on a daily basis. The majority of small business either didn’t meet the requirements for ACA Compliance, or failed to report – both can be problematic and can result in fines from the IRS. The reason for this? Many small businesses believe they are too small to be “noticed” or simply don’t have the resources and tools to report effectively. Even those companies that DO report, if they miss the proper calculations, deductions and itemization, they can STILL face fines.  So, how do companies solve this challenge of regulatory ACA compliance?


The key is to incorporate ACA Compliance reporting directly into your payroll management system. While your payroll management system is lifeblood of how your staff is paid, it needs to have a compliance component to it. Building a payroll system that allows you to generate ACA Compliance reports that will compile the payroll, check all the deductions, itemize the benefits paid, contributions, and provide you with a compliant report will take out the manual, error-prone efforts related to Affordable Care Act compliance.

The Risks of Non-Compliance to The Affordable Care Act- By the Numbers 
You may ask yourself, “this seems like a lot of effort and investment for a simple IRS report” – and there is a tendency to just rely on manual means, because the risk is perceived as low. However, consider the following:




Examples of fines:
Companies of all sizes have been levied fines by the IRS – here’s just few examples:



Making the Case for Coverage and ACA Compliance

Take the case of a 200 person company, with the challenge of complying with the ACA.  There is a cost versus risk to providing coverage and accurately reporting that coverage to the IRS.  Statistically, only 10% of the hourly workforce will elect coverage, so out of the 200 employees, on average you need to provide coverage for 20 of them.  Let’s review the cost of Affordable Care Act compliance, versus the risks of noncompliance:

Now, at a cost of $78,000/year for Medical Coverage, along with a cost of putting systems in place, this seems like it might be a heavy investment.  However, having a system in place will not only free up resources in processing the proper 1095C reporting documents for ACA compliance, it will also help to eliminate the manual errors.  Let’s consider the risk if you forego the investment.


So, while there is an investment in both medical coverage and a method to ensure Affordable Care Act compliance, the risks associated with noncompliance can be staggered, ranging from $46,000 to upwards of $440,000 in the above example.  In other cases, this risk can skyrocket to millions in fines, which a company cannot recoup.

It’s important to create a method to embed the proper checks and balances into your payroll management System for ACA compliance.  The IRS is actively expanding their efforts to target ACA compliance, and it is not just limited to larger organizations; this will affect all companies.  It’s not a matter of “If” – it’s “when”.

Consider your current method for compliance and reporting and look for a solution that provides a payroll management system integrated with ACA compliance reporting.




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