Regardless of who wins the presidential election, the U.S. healthcare system will surely continue to morph from both a care management and compliance perspective. The reality is that managing compliance under the ACA has become and will continue to be a part of every broker, HR and finance leader’s day-to-day agenda. It’s that simple. It’s that inevitable. It’s that crucial to your success.
Also see: “7 signs your rockstar employee is eyeing the door.”
I know. Just as you were breathing a sigh of relief after filing last year’s forms, the process is starting all over again — and seems destined to continue every year from now on. We’ve learned a lot in the past year. ADP helped more than 25,000 clients ranging in size from 50 to 50,000 employees manage their compliance requirements. During that time, we gained a lot of insight and wanted to share five steps that can help advisers and organizations focus their ACA compliance efforts:
1) Validate the ACA status of employees every month. Identifying who is eligible to be offered coverage under ACA rules is a core ingredient of attaining compliance and can be challenging and complex. In the 2016 plan year, the number of full-time employees who must be offered healthcare coverage increased to 95% from 70% in 2015 — a much higher threshold. Validating each month is far easier and far less stressful than doing so all at once at the end of the year.
a. Categorizing your employees incorrectly can lead to negative consequences such as unanticipated penalties. Keep in mind that any Employer Shared Responsibility assessments are determined independently for each month, even though reporting and IRS notices will be annual. So you should assess monthly to make sure you’re hitting the 95% mark. It also pays to know the difference between “HR full-time” and “ACA full-time” definitions.
2) Gather the correct data now — especially benefits data. According to an ADP study, many organizations have said that it was extremely challenging to gather benefits and payroll data for the annual reporting task of completing Forms 1094-C/1095-C for 2015. HR and finance leaders underestimated the time and effort needed to obtain the correct data from the necessary systems, such as benefits, payroll, time and labor management, and HR. In addition, source data may have resided in non-integrated systems or was inconsistent with ACA definitions, resulting in a time-consuming task of analyzing and adjusting it manually. Employers anticipate that the accuracy of forms, annual reporting, and affordability measures will be their top ACA challenges in 2016. So, begin to gather the correct employee data now.
3) Address Marketplace Notices sooner rather than later. Receiving a Marketplace Notice is like an early warning system. It can alert you that there may be a problem before a fine occurs. Understanding the implications of receiving a notice can help you prepare to manage the situation in the most efficient and cost-effective way possible. Acting now may save your business the expense of penalties later.
a. A Marketplace Notice is generated by an individual state’s Marketplace or the U.S. Department of Health and Human Services whenever an employee receives a premium tax credit to help them pay for healthcare coverage from state or federal marketplaces. The notice gives the employer a chance to appeal the premium tax credit eligibility if they did offer the employee affordable healthcare coverage.
b. An ADP study found that among large employers, those with 1,000 or more employees, 23% said that “responding to Exchange Notices” is their top ACA compliance concern for 2016. For large employers handling compliance on their own, the percentage rose to 27%. One thing to keep in mind is that the notice will be sent to the address provided by the employee, which means it may not go where you expect. So, it may be important to educate and alert local work locations that may receive these notices.
c. In fact, receiving a Marketplace Notice for an employee is an opportunity to look at the coverage offered and verify that your business complies. If appropriate coverage is not being offered, the notice gives you time to make an offer and potentially limit any penalty that may be assessed by the IRS.
4) Pay attention to the “little” things. Did you know that there were nearly 170 IRS error codes for 2015 that could have applied to Form 1094-C/1095-C transmissions? Some errors were technical in nature (format, schema, etc.) whereas others were based on data provided. The point is simple mistakes can lead to rejected IRS forms or accuracy penalties.
a. Many of these errors were the result of inaccurate Social Security numbers, Tax Identification Numbers (TINs), Federal Employer Identification Numbers (FEINs) and, believe it or not, incorrectly listing a company’s legal name. It may help to become familiar with the TIN solicitation rules. In 2015 reporting, the IRS said it will not impose penalties on a filer for reporting incorrect or incomplete information if the filer can show that he or she made a good-faith effort to comply with the information reporting requirements for 2015. But that won’t be the case moving forward.
b. And there are other potential penalties. At some point — likely December 2016 or early 2017 for 2015 filings — you may receive an Employer Shared Responsibility assessment notice from the IRS. The only way you can avoid paying those penalty assessments is by showing the IRS that you, in fact, complied. You’ll need to be able to show who was a full-time employee for each month, who was offered coverage, and whether that coverage met affordability standards. Make sure that several years of employee data is available because you may need that employee history to respond to an IRS inquiry.
5) Look ahead. ACA compliance will continue to be an evolving activity as laws and requirements change. For instance, annual reporting and Form 1095-C will have some new codes, such as “plan start month” (optional for 2015 and 2016) and two new Line 14 codes to identify conditional offers to spouses. Most 2015 transition relief codes will remain for any 2015 plan-year months in 2016. And that’s not all. The IRS also has issued a proposed rule on expatriates and expatriate plans. Begin to familiarize yourself with these planned and proposed changes today, so your overall compliance process becomes more routine.
Managing the requirements of the ACA as a part of day-to-day HR and finance activities doesn’t have to be overwhelming, but you do need to get started.
By engaging a knowledgeable, trusted partner and applying a little diligence and forethought, adhering to ACA rules can begin to integrate into your ongoing operating model.
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