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ACA Compliance: Who is Eligible for Coverage?

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A lot goes into ACA compliance, but many employers fear the financial penalties most. Are you aware of the many  ways you could be noncompliant and not even realize it?

As an employer or HR professional, you need to know who is eligible for coverage under the ACA. Sometimes employees slip under the radar—resulting in big financial penalties for employers.

Download our free Essential Guide to ACA Compliance & Reporting.

Let’s look at who is eligible for coverage and how to avoid ACA penalties from offers of coverage.

Misclassifying Employees for Benefits Eligibility

Employees reach full-time status when hours of service equal 30 plus hours in one week or 130 hours in one month. Tracking time for full-time employees may seem simple. Tracking time for seasonal or variable-hour workers can get complicated.

If you miscalculate an employee’s hours of service, you may mark that employee as a part-time. If you misclassify an employee as part time instead of full time, you could miss a coverage offer. If you miss a coverage offer, you face financial penalties with the IRS.

Miscalculating hours of service equals IRS penalties.

How to Avoid Misclassifying Employees for Benefits Eligibility

Failure to Account for Leave (Paid and Unpaid)

Don't miss a key phrase in full-time employee qualification. A full-time employee is any employee whose hours of service equals 30 or more hours in one week.

Hours of service and hours of work are not the same thing. Hours worked equals actual hours clocked by an employee. Hours of service can include paid vacation and holidays and unpaid leave days like FMLA leave.

Failure to include certain paid and unpaid days away from work, could exclude eligible employees from coverage. This violates the ACA and results in more penalties.

How to Avoid Miscalculation of Employee Hours

Your organization's definition of full time may differ from how the ACA defines it. Offer coverage to employees that meet the ACA’s definition of full-time employees. Measure hours of service, not just hours worked, to include paid and unpaid leave in hour counts.

If you do fail to offer coverage to a full-time employee for any other reason, the employee may seek coverage through other means. Doing so could still lead to financial penalties for employers.

Employee Seeks & Qualifies for Federal Subsidy from the Health Insurance Marketplace

If you don't offer MEC to any of your full-time employees, and they qualify for a federal subsidy at the Health Insurance Marketplace, you pay. The annual penalty is a nondeductible fee of $2000 for every full-time employee, even those enrolled in coverage. Exclude the first 30 employees (first 80 employees in 2015) when calculating the penalty. Penalties assessments occur on a monthly basis.  

How to Avoid a Penalty from Employees’ Federal Subsidy Qualification

Offer Minimum Essential Coverage to at least 95% of your full-time employees and avoid this penalty. Track employee time the right way, and skip the risk of missing any benefits-eligible employees.

Don't shrug off the financial repercussions of noncompliance with the ACA. These numbers could mean huge expenses for your business. Take charge of your ACA strategy. Get on board with software that will keep you confident about your ACA compliance.

Discover the tools employers need for successful (and money-saving) ACA compliance.

 Download the Essential Guide to  ACA Compliance & Reporting