A Wake-Up Call for Staffing Companies: Are You Really ACA Compliant?

I was thinking back on the many conversations I had with staffing company CEOs during the recent ASA Staffing Law Conference in Washington, D.C. What really hit home for me is the fact that the industry seems to believe ‘we’re good to go’ as far as ACA compliance and medical benefits are concerned.

I worry that many staffing companies are in for a rude awakening.

The IRS has decided that 2022 is the year they begin penalizing companies that don’t follow the rules around offering and reporting on employee health benefits. The fines can literally add up to hundreds of thousands to millions of dollars.


Let’s take one example.

There are many requirements to be compliant with the Affordable Care Act. One of them is called Employer Shared Responsibility. It requires employers with an average of 50 or more full-time equivalent employees (FTEs) to offer coverage to 95% of them. The coverage must be affordable, minimum value coverage (MVC).

Affordability means that employees cannot be charged more than a certain percentage of their annual household income for health insurance. This is complicated as the affordability percentage changes every year. For 2021 it was 9.83% and for 2022, employers can only charge 9.6% of income. Payroll systems need to take these changes into account.

So let’s say for example you are a staffing company with 100 FTEs. The penalty for failure to provide coverage to 95% of employees is called Penalty A and it is $2,750 per employee starting after employee number 30. In this example, you could be looking at Penalty A of $192,500.

It doesn’t end there. There is also Penalty B. In this case, if you haven’t offered affordable coverage to an employee and they purchase insurance on the open market, the penalty would be $4,120 for each employee receiving a subsidy on the open market.

Adding insult to injury, there are reporting penalties as well. The IRS will be looking to make sure your reporting is both timely and accurate. This requires the following information:

  • Your company EIN (employer identification number)
  • TINs (Individual taxpayer identification numbers)
  • Addresses of employee
  • Names of employee’s dependents covered
  • The months of coverage for employee and their dependents
  • Type of insurance provided

A word to the wise

Before 2022, the IRS provided ‘good faith transition relief,’ to companies that made mistakes in filing or employee coverage. Companies were sent fine notices (226J letters) but the IRS allowed them to correct their forms and errors in ‘good faith.’ Most fines were waived. All of that is going away, starting right now.

For companies that have large hourly, transient or seasonal workforces, keeping track of who is offered coverage requires a very thorough and seamless process.

What should staffing companies do now?

It’s likely that your broker is telling you how to be compliant. But how are they assisting you in being compliant?

We recommend that you ask your broker the following questions:

  • How do I know that my plans are ACA compliant in terms of coverage and affordability?
  • How are we capturing waivers, i.e. those employees who refuse coverage?
  • What proof can you produce that every employee has been offered insurance?

If you are a staffing company and need assistance ensuring that you are 100% compliant with the ACA, ask us about StaffingEdge. This unique program provides easy, affordable ACA compliance including fully-automated enrollment / administration, tracking and reporting, and more.

If you’d like to speak with one of our experts, contact us at kcleary@tacbenefitsgroup.com.