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Affordable Care Act

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The Affordable Care Act (ACA) places specific requirements on employers to offer health coverage and report benefits information to the IRS. California businesses with 50 or more full-time employees (including full-time equivalents) must follow the ACA’s employer mandate to avoid steep penalties.

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Under the ACA Employer Shared Responsibility Provisions (IRC §4980H):

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  • Applicable Large Employers (ALEs) – Employers with 50 or more full-time employees or equivalents must offer coverage.

  • Coverage Standards – Health plans offered must be:

    • Affordable – The employee’s share of the premium for self-only coverage cannot exceed a set percentage of household income (9.12% in 2023; adjusted annually).

    • Minimum Value – The plan must cover at least 60% of total allowed costs of benefits.

  • Reporting – Employers must file annual IRS forms:

    • Form 1094-C (summary to IRS)

    • Form 1095-C (employee statements showing coverage offered)

  • Eligibility Tracking – Employers must track employee hours to determine ACA full-time status (average of 30+ hours/week or 130+ hours/month).

  • Penalties – Employers who fail to offer coverage or provide incorrect reporting may face “A” penalties (failure to offer) or “B” penalties (coverage not affordable or adequate).

 

Why this matters:
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  • Financial Penalties – ACA penalties can exceed $2,000–$4,000 per employee per year, adding up quickly for businesses.

  • IRS Scrutiny – Inaccurate or late ACA reporting is one of the most common audit triggers for mid-sized employers.

  • Employee Satisfaction – Offering compliant, affordable coverage helps recruit and retain top talent.

  • Integration with Payroll – Because affordability is based on wages, payroll and benefits data must align to stay compliant.

 

At Sprout & Vine, we integrate ACA compliance directly into your benefits administration and payroll systems. We track eligibility, monitor affordability, prepare IRS filings, and keep you updated as federal guidelines change—so compliance is automatic, not an afterthought.

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