Tips for 2023 Affordable Care Act Compliance

By | Accounting, Audit, Insurance | No Comments

One of the more controversial aspects of recent legislation was the increase of funding for the Internal Revenue Services’ enforcement team. Many expect that the IRS will turn their attention to previously neglected areas of enforcement, including the Affordable Care Act (ACA).

Affordable Care Act: Compliance Basics

If it’s been a while since you reviewed ACA compliance, here is a brief refresher. Large employers with 50 or more full-time employees are required to provide adequate and affordable medical coverage to their employees. If they fail to do so, the penalties include a fine of $229.17 a month or $2,750 for 2022, multiplied by the total number of full-time employees in excess of 30. The 49080H(b) penalty amount of $343.33 a month or $4,120 for 2022 is assessed on a per-employee basis for every full-time employee who receives a premium tax credit after not being offered adequate or affordable coverage.

Compliant Companies May Still Face Audits

Let’s assume that your company meets the ACA coverage requirements and fully complies with the Affordable Care Act. You may feel you’re in the clear. However, just because your company is complying does not mean it is exempt from an ACA assessment. Failing to complete forms 1094 and 1095-C can raise red flags especially if you report health insurance amounts on forms W2 filed with the IRS. This kind of discrepancy can lead to questions from the IRS and/or employees when trying to file their taxes which could lead to fines and assessments being charged to you for non-compliance. This failure can also flag other governmental agencies leading to other non-compliance fines and penalties.

Up until 2021, the IRS held a policy of “good faith,” meaning that if employers can demonstrate they were trying to comply with the requirements in good faith by showing their due diligence, they were given grace to rectify any incomplete or incorrect reports. That grace period, however, ended in 2022, and many are seeing an uptick in IRS inquiries over incomplete or incorrect ACA reporting.

Common ACA Reporting Mistakes

Employers make many ACA reporting mistakes, but these are the most common. Check to ensure you’re not making these common errors on forms 1094 and 1095-C which can lead to unnecessary penalties and requests from the IRS for further information.

  1. Over reporting employees: You only need to issue 1095-C to full-time employees. There’s no need to issue it to part-time employees.
  2. Not validating safe harbor codes: You must validate, or provide documentation, to claim safe harbor for affordability on 1095-C. Speak with your accounting expert or CPA to determine if your company does indeed meet the safe harbor requirement
  3. Avoid “free” reporting services: If your bookkeeping software comes with “free” ACA reporting features, use with caution, and have someone double check the results that understands ACA 1095/1094 filing requirements, even if it comes out of your payroll/accounting system.
  4. Not responding to marketplace notices: Responding to marketplace notices is the first opportunity to prevent mistaken penalties. When an employee is determined eligible for a premium tax credit to purchase coverage from the Marketplace, they typically receive a notice of eligibility determination. If the employee can prove to the Marketplace that affordable, adequate coverage wasn’t made available by the employer when in fact it was, the employer can and should appeal. Don’t ignore marketplace notices or employee concerns that come up while they try to file their taxes annually.
  5. Get a benefit plan review annually if you are offering health insurance and other benefits to your employees unless you are an expert in ACA compliance and filing requirements. Another option is to outsource ACA processing and associated compliance to a third-party provider like your health insurance plan providers. Paying for a benefit plan review or outsourcing this function to a third party that specializes in this area will be well worth the cost of these services. Increased priority has been given to ACA filing & compliance starting in 2022 from the IRS and is evident with the number of agents they have assigned to this area for 2022.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Do You Have D & O? What You Need to Know About Directors and Officers Liability Insurance

By | Insurance | No Comments

Do you have D & O? That’s directors and officers liability insurance, not some unpleasant medical condition. In all seriousness, D & O is insurance that nonprofits know they need but rarely understand.

There’s good reason for that. According to some insurance industry experts, many D & O policies require dozens of pages, sometimes up to 90 pages, to explain what they cover and what they don’t cover.

While we can’t delve into what your nonprofit’s specific D & O policy covers, we can review the basics with you here and provide you with some information on what D & O insurance is, what it covers, why you need it, and how to ensure you have adequate coverage for your nonprofit.

What Is Directors and Officers Liability Insurance?

Nonprofits typically have both directors and officers leading and guiding the organization. Those in leadership positions should have the knowledge, experience, skills to make sound judgement calls—but that isn’t always the case. And, of course, even the smartest and best people make mistakes.

The litigious environment in which companies, including nonprofits, operate today opens them up to lawsuits in which claims of negligence can lead to expensive judgments. Board members and officers may be unaware of all of the laws governing their conduct and how to avoid mistakes. The results can be devastating both to them personally and to the nonprofits they serve.

What Does It Cover?

There’s no one right answer to this question. Some policies cover financial impropriety while others cover only negligence. Each policy covers different things and policies can be customized for a specific nonprofit. For example, a nonprofit providing medical services may have different coverage than a food panty or a homeless shelter, based upon the risks taken by the officers and directors when making decisions.

Generally speaking, most directors and officers liability policies cover:

  • The personal assets of directors and officers and their spouses if they are sued for actions taken during the course of their duties
  • Legal fees, settlements, and other costs associated with suits in which directors and officers are involved

Directors and officers may be held responsible for:

  • Misuse of company funds or breach of financial duty that leads to losses or bankruptcy
  • Misrepresentation of company assets
  • Fraud
  • Failure to comply with workplace laws
  • Intellectual property theft
  • Improper actions or lack of corporate governance

Does Your Nonprofit Have Enough Coverage?

Most nonprofits do not maintain adequate coverage. Lawsuits have been increasing over the past several years, especially class action suits, which can leave an organization vulnerable.

If your organization failed to conduct a thorough due diligence on its new board members, officers, and directors, it may already have a potential problem on its hand. Many nonprofits rush to fill vacant board seats and struggle to find willing candidates. Those they do find may lack the experience to avoid costly errors.

It is a smart idea to meet annually with your insurance broker to discuss your current coverage. Your broker can advise you on whether or not increasing coverage is warranted and what the potential risks might be that you need to protect against for your nonprofit. Each organization is different, and each requires varying levels of coverage.

Custom Coverage Is Available

Lastly, know that custom coverage is also available. In fact, many brokers recommend custom coverage so that the nonprofit is adequately protected against its’ unique risks. Since there are so many variables that lead to lawsuits, a skilled broker can help you navigate the potential minefield of risk and shield you from many possible issues.

Director and officer liability insurance is a must-have for your nonprofit leaders. It’s imperative that you have enough coverage so that they can feel confident doing their job. It’s well worth making a phone call to your insurance agent or broker to check on the details of your current policy.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.