Safe from the Affordable Care Act Penalties?

Safe from the Affordable Care Act Penalties?

Now that the Affordable Care Act, otherwise known as ObamaCare is in full swing, we hear many employers making the statement “I offer Health Insurance to my employees, I’m safe from the Affordable Care Act penalties, Right?” Unfortunately, offering health insurance is just one of the many hurdles you must pass before you are completely free from penalties that could be levied on employers in the coming years. We spend a lot of time discussing the Pay or Play rules for employers with 50 or more employees. Realistically, employers should have already addressed this issue or are addressing this issue this year. If not, this should be a top priority immediately! In this article, I am going to forgo that topic and touch on the less well known risks to employers.

Many individuals believe that in order to pay for the costs of the ACA law, the government is going to have to collect additional revenue. The first place they will look to is you, the employer. Since the passage of the ACA bill, the government has been slowly implementing portions of the law that have serious financial risks to the employers who do not comply.

Here are just a few common penalty risks we find:

1.) Doing Mid-Policy Year Changes- Since the passage of ACA, the employers who make mid policy year changes (this means off renewal date) and do not provide employees at least a 60 day notice of the change can be subject to a $1,000 per employee fine for not giving proper notification.

2.) Not providing the Summary of Benefits and Coverage- Once an employer makes a plan decision they must notify employees with an updated Summary of Benefits and Coverage to ALL ELIGIBLE EMPLOYEES, for all plans offered in the appropriate time. If you fail to comply, the penalty can be up to $1000 for each willful failure and it may also trigger a $100 per day per individual fine as well.

3.) IRS CODE 6055 and 6056 (form 1094 and 1095)- These forms will be filed in 2016 for 2015 wages for all Applicable Large employers, meaning an employer with more than 50 full time employees. These forms are the indicator of who in the workplace was offered coverage and if it was deemed affordable. These forms will be sent to the employees to file with their taxes and ultimately will be coordinated to see if either the employer or employee is penalty/fine eligible. Most fully insured employers will only be responsible for the 6056 portion and most self-insured employers will be responsible for both 6055 and 6056. The fine for not providing these forms or doing them incorrectly would be $100 per statement.

4.) Form 5500- Generally employers with more than 100 covered employees must file a Form 5500 with their accountant by the last day of the seventh month. The Form 5500 covers costs and fees associated with the plans offered. The fine for not filing the 5500 is based on employer size and generally should not exceed $4,000 per plan for large employers.

We find that most employers are unaware of the above risks because few, if any, have been penalized for not complying. However, as the ACA costs become more prevalent these are just a few of the easiest ways the government can generate significant revenue quickly without having to raise taxes. The general public and employees will rarely see the effects of these fines as the media rarely reports on fines that hit owners of the businesses.

There are a few other notices/requirements that employers are asked to do today which have no penalty attached with them for not complying. However, as the costs go up, the penalties for non-compliance could be added to generate revenue if needed. We recommend complying with the following notices and filing:

5.) Exchange Notices- Employers must provide all new hires and current employees with written notices about the health insurance exchanges and how it pertains to the health plan offered. For new hires, it must be provided within 14 days of hire. For current employees, it must have been provided by October 1, 2013 or if there has been a change to the eligibility.

6.) Medicare Part D Credible Coverage notice- Every October 15th employers must notify their covered employees if their health plan is considered credible or non-credible, even though there may be no covered individuals under the age of 65 on the plan. We recommend that employers distribute this notice regardless.

7.) Disclosure to CMS- Within 60 days of the beginning of a new plan year, every employer must disclose to CMS if their prescription drug plan is credible or non-credible, by filing online at

To wrap up, as of today, we have not seen many employers being hit with fines for not complying with the above requirements. We recommend that employers get into the practice of complying and make sure they stay as compliant as possible. Once the audits start happening, it could be too late to shore up the house.

Unfortunately, as business owners and operators, a lot of these responsibilities fall back on you. Make sure your teams are up to speed and you have a trusted advisor in your circle.

Category Features, Well Being


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