ACA Requirements and Payroll

According to the Affordable Care Act (ACA), all American citizens must be enrolled in some form of health insurance plan that meets minimum essential coverage or pay penalties. There is no doubt that this broad reaching plan has significantly impacted the way employers manage their employees and employee data.

The following defines what information companies will need to focus on to comply with the current regulations of the ACA. All indications are that it is going to require cooperation between the insurance company, the employer and the employee to gather the necessary information to comply.

As of Jan 2015, all companies with 100 or more FTE’s (full time and full time equivalent employees) are required to comply with all the regulations of the ACA. These companies are designated ALE’s or Applicable Large Employers. As of Jan, 2016, the number FTE’s that define an ALE will be reduced to 50 FTE’s.

If you are a client of Time & Pay, and you are, or will be an ALE, we hope you are using our E-based PayEntry system. If you are an ALE and you are not using PayEntry, we strongly encourage you to do so. Please contact your CSR to learn more about getting set up on PayEntry as it will significantly improve your ability to comply and lower your cost of compliance.

PayEntry will allow you to enter and maintain data that is essential to producing accurate 1095-94C reports that all ALE’s are now required to file. Time & Pay is ready to generate these reports. However, like any other report in any software system, they will only be as accurate as the data input and maintained in our system.

Note: If you have not been keeping up with ACA related data and need to play catch up, Time & Pay will be able to generate a spread sheet with the fields indicating the data required in each field. Employers can fill out that spread sheet and send it back to us. We can then import that spread sheet into PayEntry populating the required data fields in the system.


Items that need to be tracked (and can all be tracked in PayEntry):

Note: Form 1095-94C require data to be defined on a monthly basis so you must keep records up to date.

The Health Insurance plan offered:

  • Does the company offer a Health Insurance Plan or is it Self-Insured?
  • Does the plan meet the MEC (minimal essential coverage) requirement? (Your insurance provider will be able to inform you of this.)
  • What is the premium cost?
  • What is the employer/employee share?
  • Is the employee enrolled in the plan?
If the employer is self-insured
  • You must track employee family members/dependents
  • Need name of dependent, DOB and SSN

Note: If you are self insured, no matter how many employees you have, you must file the correct 1095-94 beginning in 2016 for the year 2015.

You must track Employee status
  • Is the employee full time or part time?
  • Are they seasonal?
  • Have they been terminated? Rehired?
  • What are the dates that the person was hired, terminated, rehired, moved from full time to part time, or vice versa, etc.?

Safe Harbor:

If you claim Safe Harbor status, you can indicate so in the system, but you must be able to verify it. When you claim Safe Harbor, you are basically saying the plan you offer is affordable based on the criteria set out in the ACA. (Are premiums paid by the employee no more than 9.5% of their household income?)

To solve the problem of trying to verify affordability, the IRS will allow ALE’s to utilize Safe Harbor status based on 3 criteria.

Those criteria are:

  • Are annual insurance premiums paid by the employee 9.5% or less than their wages reported in box 1 of their W-2?
  • Are annual insurance premiums paid by the employee 9.5% or less than their rate of pay on an annual basis?
    • If the answer is yes for your lowest paid employee, it will be yes for all employees.
  • Are annual insurance premiums paid by the employee 9.5% or less than of the Federal Poverty Level ($11,770 in 2015) or $1,118.15?

If you answer yes to these questions, you may claim Safe Harbor status. An employer may choose one or more of these safe harbors for all of its employees or any reasonable category of employees, provided it does so in a reasonable and consistent basis for all employees in a category.

Aggregated ALE Group

If you are involved in multiple companies, ie: the same individuals are involved in the ownership of more than one company, the ACA does not allow you avoid compliance by having multiple companies, each with less than 50 employees. The IRS looks at all those companies as one ALE in determining ACA compliance requirements. This type of organization is classified as an Aggregated ALE.

While each company will be required to file 1095’s for all employees, they will file an aggregated 1094. The 1094 will indicate which company is the Authoritative ALE member. In other words, one member of one company is signing the aggregated form and taking responsibility for the accuracy of all the data pertaining to all companies in the Aggregate.

It is also important to note that if you have multiple companies that establish you as an ALE, and Time & Pay is not doing payroll for all those companies, we will not be able to produce an Aggregate 1094 that will be Authorized for filing. We will be able to produce the 1095’s and an unauthorized 1094.

Signing the 1095-94

All ALE employers will have the capability of reviewing the 1095-94 forms in PayEntry and then electronically signing them, once they are comfortable with the information on the form. Time & Pay will not be signing these forms as a POA.

1095-94 filing

The 1095 is like the W-2. All forms will be required to be sent out to the employee by Jan 31. 1094’s will be filed with the IRS electronically within the designated time period.

Are you an ALE?

If you are having trouble determining if you have 50 or 100 Full-Time and Full-Time Equivalent employees, please keep in mind Time & Pay provides our automated timekeeping system that will track the number of hourly employees and how many hours they work on a monthly/annual basis.

The system will generate accurate, qualified reports that will indicate monthly employment status. These reports will be accepted by the IRS in indicating how many FTE’s are in your employ. Note that all employees- management, salary and hourly- are to be counted in your ALE determinations.

Author: Andy Scheu
Andy was just six years old when his father started Time & Pay and has watched it grow from a one-man show to an organization with more 15 employees, helping over 800 companies across the country. He was honored to become a part of Time & Pay in 2010 as an account executive and began growing their customer base in the Chattanooga, TN area. Now acting as Director of Marketing and Sales, Andy works to ensure that Time & Pay remains loyal to the mission established by its founder over 25 years ago..."to be the provider by choice of quality, cost effective Payroll, Timekeeping and HR solutions to businesses, that will maximize customer satisfaction, while maintaining our profitability.”

Ready to make your payroll, time tracking and HR processes even easier?