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ACA Requirements: ALE, ASO & PEO Employer Compliance

Accounting Support • Jun 15, 2022
ACA requirements for employers are demanding, but that doesn’t mean compliance must be difficult. Explore this guide Points North has put together for ALEs.
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If an organization is found out of ACA compliance, the government can fine the organization. Administrative Service Organizations (ASOs) and Professional Employer Organizations (PEOs) are key in empowering employers to remain in ACA compliance. One way they facilitate lawful compliance is by offering ACA compliance services. 

But what exactly must these employers offer, per ACA guidelines, and what's the penalty for employers not being ACA compliant? 

 

What is an ASO?

ASOs, Administrative Service Organizations for short, provide human resources services and administrative solutions for client organizations. 

ASO clients retain the risks and legal obligations as the employer, but ASOs offer clients the means to manage those obligations effectively. ASOs perform tax and insurance filing duties under the client's EIN. 

ASO vs. PEO

An ASO, which provides HR and administrative services to companies, differs from a PEO, or Professional Employer Organization, as a PEO is legally a co-employer of its clients' employees. 

Services ASOs Offer

ASOs offer administrative services that empower small and medium-sized businesses to comply with laws. Typical ASO services include: 

  • Payroll services
  • Benefits enrollment, organization, and administration
  • Tax filing
  • Bill payment, premium reconciliation
  • Negotiating corporate insurance (health, life, liability)

 

What Are PEOs?

PEOs, or professional employer organizations, perform employer services on behalf of a business. 

Legally, a PEO becomes a co-employer of its clients' employees. As the Employer of Record (EoR), the PEO can file payroll taxes for its clients through its own Tax ID number. 

As a legal employer, regulations for PEOs dictate that they take on some of its client's legal responsibilities to its employees. These include obligations to: 

  • Withhold taxes appropriately
  • Pay unemployment insurance taxes
  • Provide workers' compensation coverage

Services PEOs Offer

As a legal co-employer for its clients, a PEO can offer a wider range of services. Typical PEO services include: 

  • HR consulting 
  • Workers' compensation insurance negotiation and administration 
  • Paying unemployment insurance coverage
  • Employers' practice and liability insurance organization and administration
  • Health benefit organization and administration
  • Payroll processing
  • Tax filing
  • Safety and risk mitigation 
  • Workforce management technology onboarding and training
  • Regulatory compliance assistance 

 

What Is the Affordable Care Act?

The Affordable Care Act (ACA) is a healthcare reform law enacted in March 2010 that went into effect in January, 2014. As part of its requirements for employers, the ACA expanded health insurance coverage and reformed the healthcare delivery system to curb healthcare costs while improving quality.  

The ACA incorporated many reforms and mandates. 

For employers, the most important mandates are the Employer Shared Responsibility Provisions. ACA provisions require ALEs to share responsibility for providing health insurance.  

 

Which Organizations Must Comply With ACA Mandates?

The ACA's Employer Shared Responsibility Provisions apply to all organizations that employ 50 people or more. The law categorizes these employers as "applicable large employers," or ALEs.

Under these provisions, employers must meet three requirements. All ALEs must: 

  • Offer minimum essential health insurance coverage to full-time employees
  • Coverage must be affordable
  • Coverage must encompass employee dependents
  • Coverage must provide minimum value
  • Report information regarding essential coverage to employees
  • Report information regarding insured employees to IRS (for duration of coverage) 

 

What is the Penalty For Employer Non-Compliance With ACA Regulations?

Employers that do not abide by the employer mandate may be legally subject to penalties under the ACA. The relevant section of the law—4980H(a) penalty—sets the terms of the fines for non-compliance by year. 

Applicable Large Employers (ALEs), (50+ full-time equivalent employees) must offer affordable, minimum value health coverage to “substantially all” full-time employees or risk paying a penalty. “Substantially all” means at least 95% of full-time employees.  

The “tack hammer” penalty is also calculated monthly per employee. It can increase many times over per employee if all 12 months are determined to be unaffordable.  

There is one additional penalty per employee for each form that is filed with incorrect information. The penalty can be charged twice if an inaccurate form is sent to the employee and filed with the IRS. The form penalty goes up significantly if the employer just disregards the filing requirement all together. 

 

What Does the ACA Require from ASOs and PEOs?

As a co-employer, a PEO is subject to the same requirements as its clients under the ACA. 

If a PEO client is an ALE, the PEO must uphold all employer responsibilities regarding healthcare insurance provision, communication, and reporting for that client. 

The ACA does not set out specific requirements for ASOs, butit does require states to expand healthcare coverage by offering a basic health plan (BHP) option to residents. For many states, this took the form of expanded Medicaid coverage plans. 

Several states petitioned to allow ASOs to participate in the competitive contracting process. This, in turn, would reduce the administrative burden inherent to Medicaid expansion. 

ASOs that manage BHP health services have four responsibilities imposed by the ACA and state legislatures. These are:  

  • Program beneficiary support 
  • Referrals to healthcare providers 
  • Utilization management 
  • Grievances and appeals processing 

ASOs that primarily manage business clients do not bear these responsibilities, but they are still responsible for providing HR services that enable their clients to comply with the law.  

Which ACA-Mandated Services Must These Organizations Offer?

Most ACA-mandated services provided by PEOs and ASOs fall into two categories. These are: 

  • Human resource management 
  • ACA reporting 

The IRS uses the ACA Information Returns (AIR) system to receive and organize reports. 

ALEs must file electronically if they're filing over 250 reports on employee insurance. The IRS details the purpose and necessary uses of the system on its ACA Information Returns (AIR) page.  

ASOs and PEOs both use the AIR system to engage in ACA-mandated administrative tasks. Any HR and reporting services offered must be compatible with this system.  

How Best to Offer ACA Reporting and HR Services as an ASO or PEO

Offering ACA compliance services empowers ALE clients to stay above board and avoid fines. 

As a co-employer, a PEO specifically holds considerable responsibility for a client's compliance with the ACA's employer mandates. ASOs are similarly encouraged to support ALE clients with the administrative aspects of ACA reporting.  

To support PEOs and ASOs in their pursuit of clients' ACA compliance, Point North created the ACA Reporter Partnership Program.  

Partnership Program

Point North's ACA Reporter Partnership Program empowers administrative and employment support organizations to provide clients with a full-service ACA compliance solution.  

The Partnership Program trains and certifies PEOs and ASOs as resellers of market-leading software. The digital solution enables easy ACA tracking, reporting, and management—streamlining compliance for all.  

ACA Employer Compliance Software

A wide range of consulting professionals call the program easy to use. It works readily with employers who must track employees hourly, and those whose employees move in and out of full-time status.  

Each year, Point North upgrades their software solution to maintain compliance with the latest version of the ACA. This streamlined tracking and reporting solution makes it easy to bring extra value to ASO and PEO clients.  

Stay ACA Compliant With Points North

ACA compliance doesn't have to be challenging. While fines mount for some, other ALEs discover abiding by mandates is simple regardless of their state requirements.

Make employment administration easier with Points North. Contact us today to learn more about our ACA reporting partnership program. 

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