Employers procrastinating on ACA recordkeeping compliance

Only 10% of some 480 employers in 36 industries responding to a recent poll have implemented an in-house or outsourced solution to comply with Affordable Care Act reporting requirements.

The requirement that employers track employees and their dependents with respect to their health coverage on a monthly basis became effective January 1. Forms 1094 and 1095 containing that data must be filed early next year.

However, “if employers do not implement a solution soon for meeting these requirements, they may have significant risk for reporting penalties and underlying ACA excise taxes,” warns the consulting firm PWC.

See also: Employer struggles with ACA enter new phase

HR consulting and services firm PWC and Equifax issued the survey last month.

In addition to the fact that 90% of surveyed employers have yet to implement a solution, 16% of the total survey base has not yet even begun to think about how they will comply with the reporting requirements, or are unaware of what their options are with respect to getting the painstaking process done.

Challenge: multiple data sources

Part of the reason so many employers are now behind the eight-ball is that individual data elements required to complete these forms often reside within multiple systems—payroll, benefits administration, and HRIS, to name three. Some may also be held by third parties, such as payroll system vendors.

“Aggregating all of this data on a month-by-month basis for purposes of reporting to the IRS and employees can be challenging especially because of the degree of scrutiny the IRS Forms 1094 and 1095 are likely to receive,” according to PWC’s analysis of survey results.

The survey highlighted several related areas of employer concern. For example, nearly half worry about their capacity to respond to notices they might receive from public healthcare exchanges when any of their employees have asked the health exchange for a tax subsidy to buy health coverage through the exchange.

Having the capacity to respond to such notifications promptly is important since if the employee is indeed eligible for subsidized coverage, the employer could face a penalty. But the employer has an opportunity to review the employee’s request to check its validity—an important determination, given the potential consequences.

Responding in a timely fashion to those notices could pose a serious challenge, “particularly for multistate employers with many worksites since state exchanges may vary in their notices and response procedures,” PWC warns.

The top concern of “small” employers (those with fewer than 1,000 employees) is “understanding different reporting options.” Data quality, while also high on small employers’ worry list, was at the top for larger employers.

See also: Real-time reporting critical to ACA administration, compliance

Among employers that have already chosen or are soon to choose an out-sourced service provider to handle ACA recordkeeping compliance, size

appears to be a significant variable in the choice of the kind of vendor to use.

For example, nearly half (48%) of small employers plan to use their payroll services vendor, while only 10% of employers with over 5,000 employees plan to do so. The most chosen (by 35%) vendor category for that large employer segment is a dedicated ACA compliance service company.

PWC concludes its survey report by urging employers to act “soon” to resolve yow they will begin to fall in line with the ACA reporting requirements.