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By Edupliance | 16th October, 2015

Many companies are relying totally on their specific payroll software vendor to take care of the nitty-gritties of the Large Employer Mandate in the Affordable Care Act (ACA). This may sound simple, but it posing many problems for such companies because these vendors are not telling their client companies about the actual method of compensation tracking within the Affordable Care Act.

What is Affordable Care Act?

The Affordable Care Act also nicknamed ‘Obamacare’ is a law that puts the consumers in charge of their health care rather than giving it into the hands of companies, health departments and other allied agencies. Under this law, the Patient’s Bill of Rights provides American people with more robust flexibility and stability when it comes to making more informed choices about their well being and health.

The ACA – Affordable Care Act at a Glance


  • Insurers cannot cancel your coverage if your policy has any mistake.
  • You have the right to appeal if there is any denial of payment of insured amount.


  • Any unreasonable rate hikes in insurance plans have to be justified by insurance companies.
  • The premium that you should receive will be spent only on your health care and not on kind of administrative costs.
  • There is no limit on coverage. No lifetime limits on any kind of benefit incurred from health insurance plans.


  • No cost to you at all! No copayment of preventive health services. Your employer, insurance company or insurer takes care of this.
  •  You get to choose the primary care doctor from the plan’s network.
  • You can seek emergency services at any hospital outside the health plan’s network coverage. The insurance company cannot act as a barrier to emergency services.

What is ACA Tax Compliance? What does Payroll Reporting have to do with it?

The ACA requires any kind of insurance company (particularly health), government entities and employers to provide detailed tax information under IRS Section 6055 and 6056, which is normally carried out with the help of payroll reporting software.

However, the IRS noticed some irregularities in reporting by many companies and slapped them with massive fines on charges of negligence and misconduct. Now, the IRS has drafted some new taxation information forms (1095-A, 1095-B and 1095-C) that should be used to report such data to ensure proper compliance.

These forms are meant for:

  • Form 1095-A: if you are a dedicated Health Insurance Marketplace.
  • Form 1095-B: if you are a self-insured plan sponsor or a general insurance company.
  • Form 1095-C: if you are an employer with many employees reliant on you for their health care plans.

Many payroll reporting software vendors are yet to update their software according to the new norms and it is up to you to ensure that you do not face litigation due to noncompliance.

What if the Employer doesn’t comply with the law?

The ACA has many different rules, which needed to be followed. If you do not supply required data to the IRS, you are in non-compliance of this law.

Large employers that fail to comply with this law can face hundreds to thousands of dollars in penalties that are assessed based on their employee structure and The Employer Shared Responsibility Payment law. The penalty can range from:

  • Over $40,000 per year in penalties for a company with at least 50-100 full-time employees.
  • Over $240,000 per year in penalties for a company with at least 200 full-time employees.
  • Over $840,000 per year in penalties for a company with at least 500 full-time employees.

The penalty can range from $100 per form (per employee) to over $1.5 million per company!

What can you do to make things right?

With the newly amended law, employers and insurance companies will now be required to furnish detailed statements to individuals about their healthcare plans.

In case of a company, an employer has to offer affordable coverage to all its full-time employees. These details can be filed electronically via a payroll reporting software.

The reporting requirements are as follows:

  • Minimum Essential Coverage (MEC) reporting that applies to all health insurance issuers and sponsors of ‘self-insured’ health plans.
  • Applicable Large Employer (ALE) reporting that applies to employers and companies with at least 50 full-time employees currently working for them.

The law forces the employers to report and collect these requirements based on the employee statements and information returns.

Since most employers consider this a cumbersome task, or think that this is not their job, they rely on their payroll reporting software vendor to do so. However, failure to maintain a full and detailed audit trail or not tracking month-by-month changes is likely culpable.

If your data is unclean or tampered with, it is sure shot litigation for you. If your vendor offers you with very low cost reporting, or bundles it with their specific payroll software, they will do their job half-heartedly and chances are that the data will be incorrect.

The ACA law is very clear in one thing: third parties will NOT be responsible for mistakes in reporting which hangs the noose above your head.

That is all. Doing so will save you from litigation and save your business’s money.

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