Los Angeles, Calif., June 7, 2023 – While most employers say they believe they are fully compliant with the Affordable Care Act (ACA), approximately one in four have been audited by the Internal Revenue Service, according to new research from HR technology company Trusaic. Among the industries most at risk of receiving an ACA IRS penalty letter? Health care and social assistance, food services, agriculture, and educational services.
IRS enforcement of the now 13-year-old healthcare law is ramping up, due in part to legislative changes including the Inflation Reduction Act and American Rescue Plan. Employers who fail to comply with ACA’s Employer Mandate can face annual penalties as high as $275,000 for every 100 employees after the first 30. To add to the severity of the situation, the IRS may use its levy power to satisfy outstanding ACA penalties. In addition to six jurisdictions that have their own ACA regulations, several other states are considering adding regulations over and above what is required by the federal government.
“Industries with high turnover or a high percentage of hourly workers with varying schedules are particularly susceptible to getting penalized by the IRS,” says John Leathers, Executive Vice President of Product for Trusaic. “These situations present unique challenges to a reporting process that most employers already find overly burdensome.”
Trusaic’s report, “The Challenge of ACA Compliance,” which was conducted in partnership with Creelman Research, examines employers’ perspectives and actions around managing ACA reporting requirements and offers insight on why compliance can be difficult and how to improve the process. This study drew on three sources of data: a set of focus groups, a survey of HR professionals involved in ACA compliance, and anonymized information from Trusaic’s internal database of penalty responses. Download the report here.
Among the report’s key findings:
- About one in four employers say they have been audited by the IRS for potential ACA non-compliance
- Many employers find compliance a challenging task: 73% of respondents find the reporting requirements somewhat or overly burdensome
- Nearly 70% spend more than 80 hours a year on ACA compliance
- Respondents cited a variety of challenges including a lack of clarity of the rules, complex tracking requirements, complicated situations, and tight deadlines
- The most commonly cited compliance problems are employee miscalculation, determining ACA affordability and additional state reporting requirements
- The industries most likely to receive an ACA penalty letter are agriculture/forestry/fishing and hunting, accommodation and food services, educational services and health care and social assistance
“The challenge of ACA compliance is only going to get worse,” says Leathers, who notes that the IRS good faith period has ended. “Organizational leaders may not understand the nuances of compliance. It’s up to HR to educate them about the complexity and the risk.”
Employers can assess their ACA efforts by completing an eight-question quiz that evaluates an employer’s unique workforce and any complexities that may create compliance challenges. Employers concerned about their ACA compliance and subsequent penalty assessment from the IRS can also download the ACA 101 Toolkit.
At Trusaic, we believe the workplace should work for everyone. We are a workplace equity technology company committed to advancing social good by helping organizations achieve pay equity, foster a more diverse and inclusive workforce, assist economically disadvantaged individuals with finding work, and ensure employee access to affordable healthcare. With data-driven, people-centered solutions designed to solve HR’s most complex workforce challenges, our mission is to create a better working world.