The ACA clock is ticking

By now, most employers subject to the Affordable Care Act’s employer mandate are aware that they are required to submit, for the 2015 calendar year, an IRS Form 1095-C for each employee who was full-time for at least a month in 2015, or who had coverage under a self-insured medical plan of the employer for at least a day. These Forms, 1095-C, are all transmitted to the IRS with a Form 1094-C transmittal document on which the employer will demonstrate compliance with other aspects of the employer mandate.

I’ll give you a minute to take that all in.

Some employers have chosen to tackle this daunting process all by themselves — pulling the needed reports, completing each and every form and sending everything to both their employees and the IRS. To those employers, cheers! And may the odds be ever in your favor.

For some larger companies and more complex corporate structures, doing the reporting manually is too much of a burden, and so an investment in technology is the appropriate decision.

Also see: "How to help clients avoid ACA filing penalties."

Most ACA reporting technology solutions are taking three to four months to implement in time for 2016 reporting. As we draw closer and closer to the end of the year and the end of the ACA technology implementation timeline, many prominent ACA reporting technology vendors are closing their doors on new business for 2015. (In addition, many of the vendors still accepting business and guaranteeing to meet deadlines are increasing their rates by as much as 60%.)

As a consumer desperately needing a solution, this is frustrating. As a consultant helping many clients find solutions to solve their ACA reporting needs, this is also frustrating; however, I have to respect that these vendors know their limits. We would rather see them say “no” to taking on new clients than saying “yes” and completely bombing the implementation. It is saving their relationships with existing clients and potential future clients, at the cost of them earning a few more sales dollars right now.

I would like to emphasize that these vendors are still taking on new clients — for 2016 implementation, not 2015.

Caution

As time is running out to implement ACA technology, we’ve also been hearing vendors claiming that though they might not be able to get your reporting system up and running to complete the IRS forms on time or 100% correct this year, because of the “good faith” effort you, as an employer, will be fine.

We need to urge caution on this matter, as the IRS has not actually defined what will constitute as a “good faith” effort with regard to ACA reporting. This should be considered when signing contracts with your ACA reporting vendors. Just because vendors are promising you will avoid penalties because you were able to provide a “good faith” effort doesn’t mean you actually will be penalty-free.

We’re not saying that sending your IRS forms in a few weeks late, incomplete, a little wrong or minus a few employees wouldn’t be considered a “good faith” effort, but we do want you to be careful when moving forward with the vendors making this promise.

We expect the IRS to be reasonable, but it will determine (not HR technology vendors) what counts as a “good faith” effort. 

Also see: "Employers face looming reporting deadline."

With all of that said, deciding not to submit the IRS forms will never amount to a “good faith” effort. So what should you do if a vendor is promising compliance with the ACA because of a “good faith” effort?

First, know that you might have to take on more of the reporting responsibility this year. Time is running out, and very few vendors are still able to take on the full reporting responsibility for you. This means that you will most likely be required to designate and fill in the codes on the 1094 and 1095 forms.

Be prepared to be involved in the implementation process.  Ensure your data is in the best possible shape: The better data you have to input, the better data you can pull from the system and use to complete the forms.

Familiarize yourself with the vendor’s data requirements and in what form you are required to provide to the vendor. Will your Excel file of raw data suffice, or will you need to submit your data in a different file form?

Prepare yourself for the possibility of fines for not having your errors excused under the “good faith” standard. It also never hurts to have an escalation plan ready in case any issues do arise during implementation. Know your vendor point of contacts and how they can help.

Look for “good faith” verbiage in your contract with the vendor. There’s a good chance most of the vendors boasting your compliance with a “good faith” effort were also sure to include language to protect themselves in case “good faith” wasn’t quite defined the same way they thought. This just means you can’t blame them when you get the fine for your late, incorrect or missing forms; that responsibility is yours. Working indemnification language into your contract would be ideal. At the very least, familiarize yourself with the contract and know who is responsible and or liable for what.

We are all walking through the ACA land of the unknown, and anything you can do to prepare yourself for potential outcomes can only help. Technology is a great way to ease some of the burden the ACA is imposing, but know that it isn’t a cure-all.

Mandacina is director of HR technology outsourcing at Lockton Benefit Group. Reach him at (816) 751-2374 or bmandacina@lockton.com.