You awake with a start. At first, you dont know where you are. Your heart is pounding and you are running behind in fact way late. That final exam is today and you havent studied. In fact, you havent been to one class in more than a month. You thought you had dropped the course, but now you realize your grade and your graduation depend upon this test for which you are totally unprepared.
Weve all had that dream. Grown adults, many years removed from the halls of education, can still find themselves transported back to the terrors of academics and anxiety in a moment. They wake up with their palms wet and their foreheads beaded with sweat. This is because, like all of us, theyve learned how difficult those comprehensive final exams can be and how truly difficult it is to be fully prepared.
Starting now, and for the next year, many of us in the HR profession are going to be hearing the shouts and gasps from slumbering employers who are waking up to find themselves unprepared for the Affordable Care Act reporting nightmare that awaits. The true comprehensive exam for the HR infrastructure of their business will occur sometime between now and the upcoming January 2016 reporting deadline for each eligible employee. Then in March, employers with more than 50 full-time employees will need to file newly released forms: 1094-C, 1095-C and 1095-B, for this calendar year with information captured from back to January 2015. (Note: reporting is not based upon plan year.) These forms will help employers report whether or not they provided a qualifying offer of health insurance coverage to their employees that was both a) affordable (costs the employee no more that 9.56% of the employees household income) and b) qualifying (providing minimal value coverage at 60% actuarial value.)
At first glance, the employer responsibility section of the ACA doesnt seem that nightmare-inducing to administrate: An employer shall provide qualifying and affordable health insurance coverage for their full-time employees or pay a fine. But, as the regulations have been released from the administrative agencies recently, the full difficulty has become clear. For example, 30 hours per week (130 hours per month) is now being used as a definition of full-time for variable hour employees for ACA purposes, replacing the 40 hour traditional definition. (Of course, just to make things as administratively difficult as possible for workforce management, the unchanged Fair Labor Standards Act still governs overtime calculations at 40 hours a week.)
If ever there was a time for HR technology to shine like the new day comforting someone awaking from a nightmare, this is the morning. But alas, just like some scare tactic of the horror film industry, we awake to find the comforting new day just part of the same nightmare. (1953s Invaders from Mars has to be the granddaddy of these plot twists.) For many employers, the data they will need to complete this reporting lies buried in disparate HR systems often from different vendors.
ACA reporting will require data from payroll (to determine affordability), time and attendance (to determine full-time status), HR (for the employee and employer indicative data) and benefits administration (to prove an enrollment event was offered to the newly-eligible employee) at the very least. But even these four systems may not be complete. Is there a separate leave administration or absence management solution in play? Employees on leave will still create a reporting burden for the employer. For any employer to comply with the ACA, they will need to take an inventory of where their data is stored and how easily they can aggregate the data sources from within their enterprise. Those employers using service bureaus and outsourcers will also have to review their partners abilities and contractual commitments. Here are some questions that may help an employer assess their own readiness for compliance, as well as that of their vendor partners:
- How are we handling our variable hour employees (and tracking their full- or part-time status)?
- Are we going to manage our variable workforce to the 130 hour per month threshold? If so, what active workforce management tools (dashboards, alerts) will be required?
- Are we able to track our employees health insurance offers for coverage, enrollment status and income as of a point-in-time for IRS reporting?
- How are we going to get the required IRS documents, timely, into the hands of each employee who was offered one day of coverage, and then provide the aggregated information to the IRS? Most importantly, if we receive a call in two years that one of our employees received a subsidy on a public health insurance exchange, could we defend that claim with data on affordability and qualifying offer of coverage?
As often is the case with any HR question, the answer of how to best solve this employer HRIS reporting conundrum is
it depends. This it depends is more than just a cliché. Instead, it can be a two-factor decision matrix to help an employer understand both where they are starting from and how to best get to their destination. As established vendors rapidly upgrade their existing solutions, and fast-moving entrepreneurs launch products to fill gaps in coverage, a quilt of HR Technology is forming to blanket the slumbering employer.
The first factor is the current HR infrastructure of the employer. While there are certainly too many permutations for this blog post to cover, we can use several extremes for illustrative purposes. The second factor is the level of control the employer is going to seek with their unavoidable compliance burden.
Compliance Only: Every employer must at least have a solution (or several solutions) to meet this need
Full Control: An employer who seeks to manage their workforce and potentially lower their cost of labor
ERP (Enterprise Resource Planning) or any all-in-one database solution where the employer has direct access to the data such as an on-premise installation. (PeopleSoft, Lawson, etc.)
With all the data accessible from the employer-controlled solution, often no outside tools are needed. Instead significant internal IT resources or consulting dollars can be consumed merging, cleaning and preparing reports. If data standardization or warehousing efforts have not already happened, data uniformity issues may exist and require cleansing.
ERP solutions tend to be slow moving and will offer few new control tools that didnt exist before the ACA. Some of the first ACA solutions were point solutions that are designed to layer over an ERP to supplement the data with modeling tools, dashboards, since shuttering a benefits module is a non-starter with many employers sunk ERP investment.
SaaS (Software as a Service) solution that is still an all-in-one database solution but the employer gets access through a vendor who hosts and secures their data.
Every vendor will have to offer compliance support as that is often a key part of the outsourcing relationship. However, the level of support varies considerably. Some vendors are offering full outsourcing similar to tax filing services that completely remove compliance risk from the employer. That risk mitigation comes at a steep price ($3-7 PEPM.) More commonly, vendors are offering reports for the employer to populate and submit in a more self-service type solution similar to OSHA logs.
Vendors with more recently developed solutions (or more nimble underlying architecture) are using this regulatory change to offer modeling and management tools. The vendors who already excel in workforce management (aka time & attendance) have sprinted to the head of the pack, but tend to have notoriously weak benefits administration tools. One innovative system will automatically adjust the employees premium deduction per pay period to ensure affordability based on wages earned.
Point Solutions or multiple solutions that may be from multiple vendors requiring the merging of data before reporting is possible. (Many mid-market employers will be in this category.)
For employers with a portfolio of solutions and vendors, certainly adding one more system to the mix to enable ACA reporting is an option. However, vendor management is a huge chore for employers and often any new solution will not help corral or clean the needed data. There are also considerable limitations around reporting liability. One option is to run the data out of each system of record and then combine in a datamart. Alternatively, many employers are picking the solution most able to support reporting typically the benefits administration solution and importing hours data. This strategy is to provide reporting from the most downstream system.
In contrast to the downstream strategy, an employer focused on control might seek to empower the most upstream solution, the time & attendance system*. Since this system is closest to the actual transaction data, it would be best equipped to alert managers of employees trending over thresholds or events that require intervention. For an employer seeking the most control, often the ACA reporting dedicated point solutions will offer the most functionality, but will require considerable initial investment to implement and the addition of on-going PEPM costs (which tend to be minimal.)
*Please note we are not suggesting that an employer utilizes the data in their time and attendance system for their complete eligibility tracking. Payroll data has a more inherent comprehensive checks and balance process for accuracy.
While a more thorough consultation would certainly be needed for anyone evaluating the best path forward, this article offers any HR professional a start with some questions and a decision matrix to help them feel equipped when the frightening reality of ACA reporting dawns on their employer.
Hopefully, HR professionals will also band together to share how we are handling our ACA reporting responsibilities and to pressure our vendor suppliers for better solutions and continued innovation. The only thing we cant do much like the teenagers in the Nightmare on Elm Street movies is let our employers go back to sleep, for that would only make the approaching ACA reporting monster all the more dangerous.
Kaiser is managing director, HR technology & outsourcing practice at Lockton Benefit Group
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