Between 2017 and 2026, it is anticipated that Affordable Care Act (ACA) penalties will cost employers approximately $226 billion. Some quick-service restaurants have already received millions of dollars in IRS penalties resulting from ACA compliance failures since 2015. In our recent webinar, experts Gregg Kasubuchi and Joanna Kim-Brunetti of First Capitol Consulting discuss how operators can avoid these hefty fines, and offer tips on how restaurateurs can evaluate their companies for current and future compliance risks. They also provide extensive insights on how to respond if you've received an advance penalty notice and want to issue an appeal.
To date, the ACA has four provisional pillars, including the large employer mandate, which requires all companies employing 50 or more full-time or full-time equivalent employees to provide at least 95 percent of those employees with affordable group healthcare coverage. Due to frequent staff turnover rates and variable work schedules, it can often be difficult for restaurateurs to determine whether they are subject to the ACA employer mandate.
"There are five common compliance mistakes made by quick service restaurant employers," says Kasubuchi, who is vice president of business development. "Failure to address aggregation rules, failure to correctly identify full-time employees, failure to make timely offers of coverage, failure to offer affordable coverage, and failure to keep organized payroll and benefits records make operators vulnerable to penalties."
For the purposes of ACA compliance, a full-time employee is defined as anyone who provides 30 hours per week, or 130 hours per month, of service to a company. Affordable coverage generally means that healthcare does not cost more than 9.5 percent of the individual's monthly wages. "It's important for employers to understand these distinctions," Kasubuchi says. "Forty hours per week, for example, is not the rule for covering full-time employees."
Earlier this year, the IRS began issuing exchange notices for possible compliance failures from the 2015-2017 tax years.
"A lot of employers don't understand why they're receiving these notices," says Kim-Brunetti, vice president of regulatory affairs. "If you've received an exchange notice, it's because at least one of your full-time or full-time equivalent employees applied for health coverage through a state or federal health exchange and received a Premium Tax Credit, which typically means he or she reported not being offered affordable coverage through you, their employer."
Employers can take action if they feel a penalty is being assessed incorrectly. Notices can be appealed within 90 days, but good record-keeping is key. "Inaccuracy of data and lack of documentation are how many quick-service restaurant owners end up being penalized," says Kim-Brunetti. To contest an exchange notice, she recommends taking the following steps:
- Establish whether your company is subject to the employer mandate, and be sure to address aggregation rules when making that determination.
- Determine whether the employee in question qualifies for full-time or full-time equivalent status, based on ACA guidelines.
- Determine whether the employee in question is eligible for benefits.
- Calculate the affordability of coverage for the employee in question, based on ACA guidelines for cost relative to income.
- Identify if, and when, the employee was offered healthcare coverage by your company, and whether it satisfied the window of time provided for by ACA guidelines.
If you still have questions about the ACA's employer mandate or what to do if you receive notice of a penalty, be sure to watch our recording of "A Bad Recipe for ACA Compliance Can Lead to An Expensive and Unsatisfying Experience." During the program, Kasubuchi and Kim-Brunetti provide explanations for how employers can evaluate their current practices and ensure compliance with ACA guidelines. They also provide information on interpreting aggregation rules for operators who own more than one business, as well as tips for keeping organized payroll and benefits records, so you can avoid big penalty fines from the IRS.