Businesses must comply with health insurance rules or face fines

By JERRY CALISTRI
Special to the Gazette

Most business owners are worried about the rising cost of health insurance, but many are unaware of another looming financial burden — namely, the large fines they would need to pay if they have not complied with complex health insurance regulations.

This is because the federal government has ramped up its efforts to investigate employers who may have violated the Affordable Care Act and the Employee Retirement Income Security Act.

Businesses violate the Affordable Care Act whenever they do not offer their full-time employees health insurance coverage that is deemed affordable and adequate — and an employee qualifies for a subsidy. 

Penalties range from $2,080 to $3,480 per affected employee, depending on the particular violation and the plan year in which it occurred.

After many delays, the Internal Revenue Service has finally finished gathering and reconciling information reported by large employers since 2015 and has started sending out penalty letters for ACA violations. 

Violations of the Employee Retirement Income Security Act include failing to give a plan participant a Summary Plan Description and other documents within 30 days of an employee’s request, which can result in a penalty of $110 per day for each request.   

The Department of Labor’s increased enforcement efforts and audits have resulted in a 72 percent increase in fines levied for ERISA violations from 2016 to 2017, with a total of $1.1 billion collected in 2017.

How can a business owner avoid these violations and fines? 

The best way to prevent these problems is to consult with a health insurance broker to analyze your employee benefit plans for compliance with both ERISA and the Affordable Care Act.

For example, some brokers can help large employers track their employees’ work status (whether they are full-time, part-time, seasonal or have flex hours) and to file the proper tax forms (such as forms 1094-C and 1095-C) in order to comply with the Affordable Care Act.

Brokers also may provide employers with Wrap SPDs and other wrap plan documents that wrap around certificates of insurance and benefit plan booklets in order to satisfy ERISA requirements. In addition, some brokers generate ERISA-required benefit notices for business owners to distribute to their employees. 

It is important for employers to realize that the federal government now means business when it comes to enforcement of health insurance regulations and that failing to comply could lead to big penalties.  Jerry Calistri is president and chief executive officer of Swift Kennedy & Associates, an insurance brokerage firm specializing in group employee benefit plans.