The first year of Patient Protection and Affordable Care Act reporting was a nightmare for many Fortune 1000 employers.
Data was the No. 1 challenge businesses had to grapple with to try to meet ACA requirements. ACA-reporting vendors that represent more than 4,000 employers and 50 million individuals said their clients were plagued by a variety of data gathering, accuracy and reporting challenges in 2015, according to a survey by Hager Strategic. That’s not surprising. Data gathering for ACA reporting is complex: Most companies are forced to gather information related to benefit enrollment, contributions, and hours worked from disparate systems, causing organizational inefficiencies, headaches and unexpected high compliance costs.
Plus, the professionals tasked with ACA reporting are the same ones whose days are already filled managing benefit compliance programs and/or operations. With this added reporting responsibility, these individuals often feel overwhelmed and overworked.
Penalties loom for non-compliance
The Internal Revenue Service, however, is just getting started. It’s not a matter of whether the IRS will impose widespread fines; it’s a matter of when. The IRS has developed a large infrastructure to manage, maintain and enforce ACA regulations — budgeting $8 billion in revenue from fines related to 2015 coverage — and the Congressional Budget Office and the Joint Committee on Taxation estimate that payments of ACA reporting penalties beginning in 2016 will total $164 billion over the next 10 years.
Failure to produce and deliver statements and filings could result in a $260 fine for each required form — up to more than $3 million annually. Not only that, employers who do not offer coverage to 95% of full-time employees could be fined $2,000 per full-time employee (excluding the first 30 employees). For a business with 20,000 employees, this would be a penalty of $40 million.
Achieving end-to-end compliance
To ease the data challenges associated with meeting the evolving requirements, large employers are turning to third-party solutions to meet ACA deadlines and comply with the employer shared responsibility reporting requirement.
For employers who implement the right ACA reporting solution, the benefits include reduced costs, improved accuracy and year-to-year repeatability. Automating the processes of data collection, application of regulations, and content determination for IRS forms reduces reliance on internal resources, eliminates rework and avoids the variable hard and soft costs of using internal staff. Using technology and business rules to determine affordability requirements and offer–of-coverage codes ensures accuracy and consistency, eliminating the increased chance of errors associated with doing so manually. Above all, solving the problem with the right technology avoids having to revisit it year after year.
Employers should look for a complete solution with the ability to import complex data from multiple sources and scrub the data for reporting accuracy, along with industry subject matter expertise and personal service, to ensure they’re able to effectively:
· Gather and aggregate data from disparate systems
· Review and validate the data to ensure accuracy
· Identify full-time employees under ACA rules
· Determine affordability of coverage
· Keep up with changing regulations from the IRS to assign accurate codes for lines 14 and 16
· Deliver forms to employees on time
· Manage the administrative burdens of the filing obligations with the IRS
Here are five tips to help businesses overcome the challenges of ACA reporting:
Unify data and consolidate employee records in a master database
The challenge for employers comes down to disparate-yet-essential data. The data required for ACA reporting must be managed for accurate calculations, IRS filings and employee statements, but has never been housed in one system. Rather, separate systems house data for payroll, benefits administration, plan data and other functions. Data is typically available in different formats and isn’t always compatible; there wasn’t a reason for standardization before.
To optimize automated data collection, businesses should find a way to securely accept a monthly inbound feed of employee eligibility, enrollment and plan data, extracted from their systems. All data should be immediately archived and encrypted in a consolidated database of master employee records. To ensure data is clean and meets tax-reporting requirements, it should be run through a rules-based validation process that provides consistency, accuracy and scalability for large volumes of employee records.
Be conscious of tight timeframes for tax-reporting deadlines
Employers must distribute statements to participants by Jan. 31, 2017 and electronically file to the IRS by March 31, 2017. For employers tracking eligibility determination and affordability calculations internally with quality control gates, it’s a tight timeframe.
· Gather data throughout the year to avoid the year-end time crunch
· Perform quality testing and review sample statements based on partial-year data to ensure readiness for year-end statement production.
· Have a demonstrated process for printing and mailing a high volume of statements to participants in a short timeframe to meet compliance deadlines
Calculate eligibility and affordability data monthly
Organizations should apply business rules — once the data is validated — to calculate eligibility and affordability on a monthly basis. Data should be encrypted and stored, and used to generate reports that monitor compliance and benefit planning throughout the year.
Provide live support to answer tax questions for employees
Companies should seek ways to provide live support to answer questions about tax statements and fulfill requests for replacement forms while freeing staff to focus on more strategic initiatives.
Provide the option for electronic consent and distribution
Employers are already scrambling to meet the time-sensitive compliance task of getting forms to employees by Jan. 31, 2017. While employees did not need Form 1095 this year to file their taxes for the 2016 season, employees will be insistent on receiving forms promptly so they can complete their individual returns. By soliciting consent to receive 1095 forms electronically, employers can empower employees to receive their forms more quickly — while providing postage savings to the employer.
Large employers are complying with ACA reporting regulations with end-to-end solutions that include data gathering and integration, tax reporting, form generation, call center support, and print distribution and fulfillment. By implementing best practices for streamlining reporting processes, including the automated gathering and aggregation of data and identifying full-time employees under ACA rules, businesses are mitigating risk, frustration and wasted resources. Most importantly, businesses are solving the ACA reporting compliance problem once and forever.
Register or login for access to this item and much more
All Employee Benefit News becomes archived within a week of it being published
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access