Benefits and Compensation, HR Management & Compliance

Navigating ACA Requirements for Small to Medium Businesses

Nationwide, the Affordable Care Act (ACA) has helped businesses bring healthcare to their employees. The ACA Marketplace is an important source of coverage for 2.6 million small and medium business owners, making it crucial for them to understand the correct processes. However, for small to medium business (SMB) owners, navigating the complexities and nuances of the ACA can be a challenge. A September 2023 survey commissioned by Equifax shows that even though most SMB owners say complying with the ACA is easy, a majority also say they have received or may be receiving penalties for noncompliance.

The survey results shed light on the complex ACA processes many companies face, from the intricacies of penalty assessments to the differences in healthcare requirements across states. With rules changing and the potential for more organizations to be fined for missteps in their reporting, now is a good time for businesses to assess their processes.

The Many Hats of Small and Medium Business Owners

SMB owners are used to wearing multiple hats, some beyond their scope of expertise. They often venture into opening a business because they are experts in specific fields. But to keep the business running smoothly, they will need to take on administrative responsibilities that likely fall outside of their areas of expertise, such as ensuring their employees have access to healthcare under the ACA.

The Affordable Care Act (ACA), signed into law in 2010, was designed to make affordable health insurance available to more people, including increased healthcare access for employees of SMBs. Under the law, employers with 50 or more full-time or full-time equivalent (FTE) employees must offer affordable/minimum value medical coverage to their full-time employees and their dependents until the month they turn age 26, or they may be penalized. Since the mandate began, it’s been important for SMB owners to understand how to navigate ACA requirements, especially given the potential for an IRS-issued fine for noncompliance.

The survey revealed that almost all respondents (91 percent) felt it was either very easy or somewhat easy to comply with the ACA. However, surprisingly, the majority of respondents (72 percent) say they either have received a penalty for non-compliance or that they may receive a penalty for current non-compliance for failure to offer coverage to 95 percent of full-time employees. In other words, while SMB owners may feel like ACA compliance is easy – their experiences tell a different story.

Additionally, beginning in 2024, businesses will need to pay close attention to paper versus electronic ACA forms. In a significant development, the IRS passed a final rule (TD 9972) to expand electronic filing requirements for ACA returns, aiming to modernize the filing process and reduce paper filing. The threshold for mandatory electronic reporting will be lowered from 250 to 10 returns, effective for returns due in 2024. Notably, this change aggregates returns across various forms, including Forms W-2, 1099, and 1095, as well as income tax, employment tax, and excise tax returns, making mandatory electronic filing the norm for most businesses starting in 2024.

Navigating Penalties: The Unnecessary Loss of Time and Money

While no one would expect a SMB owner to be an expert on ACA, getting it wrong can lead to penalties. In the survey, 50 percent of SMB owners reported receiving a penalty for non-compliance when failing to offer coverage to 95 percent of full-time employees, and 40 percent admitted to having failed to provide affordable, minimum-value coverage to a benefits-eligible employee.

As ACA regulations have evolved, and penalties for noncompliance have steadily increased, including for 2024. Of the survey respondents who said they have received or may receive a penalty, 71 percent said they agreed and paid the fine. Responding to IRS inquiries can be time consuming and difficult, leading many employers to pay the fines, regardless of whether they owe the penalty or not. This highlights the need for SMB owners to take proactive measures to help avoid the associated stress, costs, and potential reputational risk.

One of the biggest hurdles of surveyed individuals (45 percent) is managing the different healthcare requirements across different states. Some states, including California, New Jersey, Rhode Island, Massachusetts, and Vermont, have implemented individual-mandated reporting for employers with employees in those states. In Massachusetts, for instance, there are earlier deadlines and unique intricacies going beyond federal requirements, adding an extra layer of complexity for employers. The 1099-HC form, which is mandated for Massachusetts state residents, requires detailed reporting on health coverage, creating additional challenges for businesses with employees residing in Massachusetts, regardless of where the business itself is located. Washington D.C., also has additional reporting responsibilities.

Empowering Small and Medium Business Owners with Solutions

Between the complexities of the ACA, variances in different states, and the rising cost of penalties, now is the time for business owners to become even more aware of changing regulations. Because SMB owners can’t be an expert in everything, many seek outside support to help them navigate the ACA more successfully.

Service providers can offer expertise and technology to help businesses better manage their ACA requirements more efficiently, regardless of size or budget. In fact, 97 percent of respondents said they find ACA vendors or legal support to be a helpful resource regarding information about the ACA. Leveraging external experts can give SMB owners the ability to focus on what they do best, saving them headaches, time, and money while helping ensure their employees have access to the benefits they deserve.

With tax season right around the corner and new regulations being implemented, now is the perfect time for business owners to consider external assistance.

Rhona Parry is the General Manager of Employee Benefits at Equifax Workforce Solutions. She works directly with compliance services under the Affordable Care Act, Identity Theft and Fraud Protection, and other employer solutions that support and benefit their employees. Prior to joining Equifax in 2017, Rhona held senior positions at the BBC, ITV, and Royal Mail in Europe. She holds a bachelor’s degree in Law and Politics, a Master’s in Competition Economics, and is a Policy Fellow at the University of Cambridge. A British national, Rhona resides in St Louis, Missouri with her family. She can be reached at

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