Payroll and the ACA: How to Stay Compliant

A person writing a check to pay the bills

ACA is quickly becoming a way of life for Americans. With its many challenges, sometimes it is difficult to determine exactly what you must do to stay compliant. Nowhere is staying compliant more important than with payroll and the ACA. If you do not remain compliant in this important area, it is possible for you to face fines and penalties.

For this reason, learning more about ACA and how it affects your payroll is important. Doing so will allow you to know everything you must do to keep both your business and your employees safe from the dangers of doing something incorrectly. Here are just a few of the things to keep an eye out for.

Why is Payroll Important?

Payroll is the central location where all the information regarding an employee’s pay flows through. This means that all of the information related to insurance flows through this same location. In a way, payroll is the intended system that monitors an employee and ensures they are insured to the minimums required by law.

Because the payroll system has so much access to an employee’s data, the government now requires employers to submit reports based on the information that flows through payroll. For this reason, it is crucial that data is correct, reports are prepared in a timely manner, and that employees are covered properly through the payroll system.

Important Steps to Follow

The first thing that must take place in the payroll system is that employees must be properly labeled as full-time or part-time employees. This one item can be a huge factor when it comes to what employers are required to provide and how the laws will affect them regarding each individual employee.

However, the most important thing that you must do through your payroll system is to track the affordability of the insurance plan you are offering to your employees. This is called employer-shared responsibility. The rule is that insurance for the employee must be affordable. It is considered affordable if the employee-only portion of the premium is less than 9.5% of the employee’s annual income.

One change that is taking place for the 2016 year is the additional forms that must be filed along with the W2. These forms are the 1094-C and the 1095-C. Each employee who was full-time for at least a month will receive one of each of these forms. Payroll is crucial to the filing of these forms as well as the distribution of marketplace/exchange notices.


One of the main issues that employers are currently facing when it comes to reporting is the fact that many of the current payroll systems are not sufficient. They were designed long before ACA was a factor and are not equipped to track many of the items that are now required. This has forced many employers to upgrade or change their entire systems.

Never before has it been so important to completely remain accurate when it comes to payroll reporting and record keeping. Not only will this help you to stay compliant, but it will help your employees in the end as well. Taking care to learn what is required of your payroll system is a definite must with the new ACA system.

ACA is something we all must adapt to. However, some departments have more adapting to do than others. Payroll is one such department. Learning more about the rules that ACA has put upon the payroll department is the best way to come up with a plan to follow the new instructions. Only then will you be able to know that you and your employees are fully compliant under the new laws.

To learn more about this important process, or to determine if you are compliant, be sure to contact us.


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