ACA Compliance for Security Companies: Avoiding Costly Penalties

The Affordable Care Act creates significant compliance requirements for security companies, which typically maintain large workforces of variable-hour employees spread across multiple client sites. The complexity multiplies because security staffing fluctuates with contract wins and losses, employee hours vary based on client needs, and part-time workers may drift into full-time status without anyone noticing until penalties arrive. Understanding ACA rules helps you avoid costly penalties while managing benefit costs effectively.

Determining Your Employer Size

The first question is whether ACA's employer mandate applies to your company at all. The rules target Applicable Large Employers (ALEs)—companies with 50 or more full-time equivalent employees. The calculation considers both full-time employees and the combined hours of part-time workers converted to equivalents.

Full-time equivalent calculation adds up all employee hours monthly. Employees working 30 or more hours per week count as one FTE each. For part-time employees, add their total hours and divide by 120 to convert to equivalents. If a part-time employee works 60 hours monthly, they count as 0.5 FTE. Average your total FTEs over the prior year—if you average 50 or more, you're an ALE subject to the mandate.

Security companies face particular challenges with this calculation because so many employees hover near the full-time threshold. A guard scheduled for 28 hours might pick up extra shifts that push them over 30 for several weeks. Contract changes can shift employees from part-time to full-time status or vice versa. Many security companies operate right around the 50 FTE line, where gaining or losing a few employees—or small changes in scheduling—flip them in or out of ALE status. Accurate, real-time tracking is essential rather than discovering your status at year-end.

Determining Which Employees Are Full-Time

Once you know you're an ALE, you must offer coverage to full-time employees—those averaging 30 or more hours weekly. For employees with consistent schedules, this determination is straightforward. But security companies often employ variable-hour workers whose hours fluctuate based on assignments, available shifts, and personal availability.

The look-back measurement method provides a safe harbor for managing variable-hour employees. During a measurement period of 3-12 months (you choose the length), you track employee hours. Following the measurement period, an administrative period (up to 90 days) allows time to enroll qualifying employees in coverage. Then a stability period locks in employee status—if they averaged 30+ hours during measurement, they're treated as full-time for the stability period regardless of subsequent hour changes.

Consider this example: A guard works variable hours based on available shifts over a 12-month measurement period, averaging 32 hours weekly. They must be offered coverage for the entire stability period that follows, even if their hours drop to 20 weekly during that period. Conversely, a guard averaging 28 hours during measurement can be treated as part-time for the stability period even if they pick up extra shifts.

Coverage Requirements

Simply offering coverage isn't sufficient—the coverage must meet specific standards. Plans must provide minimum value, meaning they cover at least 60% of expected medical costs. Most standard health insurance plans meet this threshold, but minimal coverage or bare-bones plans may not.

Affordability requires that employee contribution for self-only coverage doesn't exceed approximately 9.5% of household income. Since employers don't actually know employees' household income, the IRS provides safe harbors that establish affordability using information employers do have.

The W-2 safe harbor uses an employee's annual wages—if their required contribution is 9.5% or less of W-2 wages, coverage is affordable. The rate of pay safe harbor multiplies the hourly rate by 130 (approximate monthly full-time hours) and applies the 9.5% threshold. The federal poverty line safe harbor measures against 9.5% of the continental FPL for a single individual. Meeting any of these safe harbors provides protection even if the coverage is technically unaffordable based on actual household income you couldn't have known.

Understanding the Penalties

Two types of penalties apply to ALEs that fail to comply, and understanding their different triggers matters for compliance strategy.

Penalty A under Section 4980H(a) applies when you fail to offer minimum essential coverage to at least 95% of full-time employees AND at least one full-time employee receives a premium tax credit for marketplace coverage. This penalty is calculated per full-time employee (minus the first 30 as a buffer) at approximately $2,880 annually—and it applies to ALL full-time employees, not just those receiving subsidies. A company with 100 full-time employees would face penalties on 70 employees, potentially exceeding $200,000 annually.

Penalty B under Section 4980H(b) applies when you do offer coverage, but it either isn't affordable or doesn't meet minimum value, and an employee consequently receives a marketplace subsidy. This penalty is approximately $4,320 per employee actually receiving subsidies. While the per-employee amount is higher, it only applies to employees who actually obtain subsidized marketplace coverage rather than your entire workforce.

Reporting Requirements

ALEs must file annual information returns documenting their compliance efforts. Form 1094-C serves as a transmittal summary showing your company's offer of coverage across the workforce. Form 1095-C provides individual statements for each full-time employee documenting what coverage was offered, the employee's share of the lowest-cost premium, and months of coverage. Employees need their 1095-C forms by January 31 to file their personal taxes. Companies must file 1094-C and all 1095-C forms with the IRS by February 28 (paper) or March 31 (electronic).

Practical Compliance Strategies

Accurate hour tracking forms the foundation of ACA compliance for security companies. Time-tracking software that can calculate ACA status automatically reduces administrative burden and catches potential issues early. All compensable time must be tracked—not just hours on post but also training, meetings, and travel time that count toward weekly totals. Monitoring employees approaching the full-time threshold enables proactive decisions about scheduling rather than discovering compliance problems after they've triggered penalties.

Plan design significantly affects both compliance and cost. High-deductible health plans typically cost less while still meeting minimum value requirements. Offering multiple tiers allows employees to choose plans matching their needs and budgets. Working with a benefits broker experienced with ACA compliance ensures your plan design meets requirements while controlling costs.

Managing variable-hour employees requires balancing operational needs with compliance considerations. Consistent scheduling helps predict employee status before measurement periods end. Some companies limit part-time hours to clearly below the 30-hour threshold, avoiding the monitoring burden of employees near the line. Budgeting for coverage of employees who cross into full-time status prevents financial surprises when look-back periods reveal unexpected full-time counts.