IRS Enforcement of ACA’s Employer Mandate

The IRS is cracking down on ACA compliance, specifically targeting employers with its Employer Mandate enforcement. In a recent development, the agency is requesting more detailed information from employers undergoing audits, particularly focusing on comprehensive calculations for determining ACA full-time and full-time equivalent counts.

This new approach involves cross-referencing employers’ previous years’ ACA filings to validate claims of potential non-compliance in the new penalty assessment notices. Employers are now required to prove their full-time and equivalent employee counts, shifting the burden onto them to ensure accurate reporting.

For employers who have relied on self-serve ACA tools within their payroll or benefits administration systems, this poses significant challenges. Substantiating full-time employee counts becomes particularly difficult without a robust approach to accurately track and document employee details. Prompt action is crucial when receiving these notices from the IRS.

To navigate this stricter auditing process, employers must understand the definitions of ACA full-time and full-time equivalent employees. Additionally, the IRS is now requesting proof of ACA full-time calculations in audits, emphasizing the importance of accurate methodology.

Employers are advised to calculate and document their full-time and full-time equivalent employees for each month of the prior year to determine their Applicable Large Employer (ALE) status. Best practices for documentation and defense include accurate employee classification, digital storage of employee details, and monthly monitoring of ACA compliance.

Partnering with an ACA compliance vendor can help alleviate the burden on internal staff, minimize penalty risks, and maximize compliance. By adhering to best practices and seeking expert solutions, organizations can navigate the complexities of ACA compliance and reduce penalty risks in the face of the IRS’s heightened enforcement efforts.