ACA Employer Compliance Update

December 17, 2018

On Dec. 14, 2018 US District Judge in Texas, ruled that because the ACA’s individual penalty was reduced to $0, there is no longer a constitutional basis.

ACA Federal District Court Ruling

On Friday, December 14, 2018 US District Judge Reed O’Connor in Texas, ruled that because the Affordable Care Act’s individual mandate penalty was reduced to $0, there is no longer a constitutional basis for the law under Congress’ taxing power.  Following this conclusion, he found the remaining provisions of the law are invalid.


In 2012, the Supreme Court upheld the constitutionality of the ACA individual mandate saying that Congress could not force individuals to purchase health insurance, however Congress could impose a tax penalty on individuals that do not have health insurance. The Texas District Court case, filed in February 2018 by 20 Republican attorneys general, claimed that the individual mandate was no longer constitutional. The attorneys general argued that when Congress reduced the individual mandate tax penalty to $0 with the passage of the Tax Cuts and Jobs Act in 2017, that the constitutional basis was eliminated. Furthermore, they argued that the remaining provisions of the ACA were not valid without the individual mandate.

What Happens Now?

At this time there will be no immediate changes made to any of the ACA regulations currently in place. We expect that the district court decision will be appealed and ultimately decided by the Supreme Court. The appeals process may take several months or longer; it will first have to go to the fifth circuit court of appeals and then to the Supreme Court.

Does an Employer Still Have to Provide Health Coverage to Employees?

Yes. Employers should continue to maintain compliance with all ACA provisions until guidance from the regulatory agencies direct otherwise. Employers are still required to offer affordable minimum essential coverage to eligible employees.

Does an Employer Still Have to Finish and File Forms 1094/1095?

Yes. At this time, the reporting requirements are still in effect and these forms are still required for the 2018 tax year. Employers must furnish employees with Form 1095 and file the Forms 1094 and 1095 with the IRS by the appropriate due dates.

Will Paylocity Make Any Changes to Their ACA Services?

No. Paylocity will continue to provide all ACA services, without any changes to the services offered.

Paylocity will continue to monitor all related developments in the courts, Congress and the actions of regulatory agency and will provide updates as further information becomes available.


Thank you for choosing Paylocity as your Payroll Tax partner.

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.