IRS Audits 1 In 4 Companies Over ACA Non-Compliance

LOS ANGELES—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. Home health care is one of the industries found most likely to receive a penalty letter.
 
IRS enforcement of the now 13-year-old health care 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,” said 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.

Much of the difficulty in home healthcare arises from having a dispersed workforce. Many variable-pay workers are out in the field serving clients, so getting them to complete administrative tasks is not always easy. With respect to ACA compliance, it’s necessary to be able to prove that all eligible employees have been offered coverage, but it can be hard to get workers who are not in a central location to return the form.
 
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.

Other findings specific to the home health care industry include:

• Home health care uses industry-specialized systems for scheduling and tracking time that may not have features needed to capture and report information needed for ACA compliance.
• Within home health care, a large number of variable hour workers, and the fact the workforce is dispersed serving clients in their homes, create difficulties in data collection and analysis.
• Mergers and acquisitions create complexities in merging data and integrating systems which creates many opportunities for errors to arise. 

“The challenge of ACA compliance is only going to get worse,” said Leathers, who noted 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.