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A Three-step Guide To Simplify ACA Compliance Reporting

A Three-step Guide To Simplify ACA Compliance Reporting

As ACA compliance is fairly new and evolving, employers may have a lot of questions and confusions in compiling data and meeting reporting requirements. The reports filed by providers of minimum essential coverage and applicable large employers will be used by the government to enforce the individual and employers mandate. It will also be used to administer premium tax credits. The information furnished by the health insurers will help taxpayers and the IRS in verifying whether the taxpayers were provided adequate minimum essential coverage during the year for which reports have been filed.

Understanding and sorting out the complexities in ACA compliance is proving to be quite hard to many employers as they are busy in managing the other aspects of their business which takes up most of their time.

Simplified Option for Employers

For those employers who provide a “qualifying offer” to their full-time employees, a simplified alternative to monthly reporting of employee-specific information is provided in the final rules.

Step 1

The first step in ACA compliance is to determine the full-time employees. In companies that have 50 or more full –time or full-time equivalent employees at least 95% of them must be offered minimum essential coverage. You must use the IRS formula to determine the full-time equivalent employees. For this, add the total number of paid hours for non-full-time employees and divide this by 2080. The number you get will be the number of full-time equivalent employees.

It is better to track the number of working hours through the software to avoid errors due to overtime and holiday hours.

Step 2

Once the full-time employees are determined you need to track and document the compliance with employer mandate which means proof of coverage offered to these employees.

Document the dates such offers were made to the every one of these employees and some employees may not have taken up the offer. Offer must be made through paper or email and the same must be recorded as evidence for having made the offer. Next, you must review Form 1094 and 1095 and ensure that all relevant information is available to you. You must set up a process by which this information is monitored and recorded throughout the year to make ACA compliance easier.

Step 3

This step should be completed by employers while preparing tax form in order to be ACA compliant. The employers must report the cost of group health plans that are sponsored by the employer in box 12 of the W-2 form. This is done to show individual employees the total cost of their healthcare in relation to the plan they are covered under.

There are exceptions to this, in case, the employer provides health care to retired or former employees without providing them W-2 Form, they need not prepare this document to report the cost of coverage. Also, the employer who gives out less than 250 W-2 forms is exempted from reporting the cost.

When reporting the cost of coverage is required, the employer should include the total cost comprising of the contributions made by the employee and the employer.


ACA compliance reporting is mandatory for employers by providing minimum essential coverage to their full-time or full-time equivalent employees. For those employers who have made the “qualifying offer”, a simplified alternative to monthly reporting of specific-employee reporting is provided in the final rules. By following the above-explained three steps the employer can ensure compliance without much of hardship.

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