Hospitality employer avoids $1.1M in ACA penalties through workforce classification audit
Case study by Corry Hull, REBC®, CSFS®
$1.1M
Estimated 4980H penalty exposure avoided
2 yrs
Prior filings corrected
480
Employees reclassified and tracked
0
IRS penalty assessments received
The Challenge
A 480-employee hospitality employer had never conducted a formal ALE analysis. Variable-hour workers were not being tracked for ACA measurement periods. The employer was offering coverage to full-time employees but had no documentation of affordability calculations or safe harbor elections. An IRS inquiry had been received.
The Approach
We conducted a full ALE analysis and workforce classification audit. Variable-hour employees were enrolled in a look-back measurement period tracking system. Affordability was recalculated using the W-2 safe harbor. 1094-C and 1095-C filings were corrected for two prior years. A compliance calendar and ongoing monitoring system was implemented.
Note: This case study is a composite of multiple employer engagements. Penalty exposure is calculated based on IRS 4980H(a) and 4980H(b) formulas applied to the employer's workforce data. Sources: IRS Notice 2015-87; IRS Form 14765 (ACA compliance); employer payroll records; corrected 1094-C/1095-C filings.
Methodology & Verification▾
Baseline
Employer had not conducted ALE analysis; variable-hour workers not tracked; affordability not documented.
Intervention
Full ALE analysis, workforce audit, look-back measurement period implementation, corrected filings.
Measurement period
Two prior plan years plus current year.
Savings methodology
Penalty exposure calculated using IRS 4980H(a) and (b) formulas applied to workforce data. Avoided exposure = calculated penalty minus actual assessments.
What was excluded
Legal and consulting fees excluded from savings calculation.
Employer size
480 total employees; ~310 full-time equivalents for ALE calculation.
Funding type
Fully-insured medical plan.
Source / verification
IRS penalty calculations verified against published IRS guidance. Filing corrections confirmed by payroll vendor.