July 2, 2016
As the first season of Affordable Care Act reporting comes to a close, employers have learned some key lessons. Here’s a snapshot of what worked, what didn’t and how to move forward.
–By now, employers should realize that the ACA reporting requirements serve three main functions: To ensure that employers are offering coverage to their eligible employees; to ensure that employers are offering affordable coverage according to one of the three IRS safe harbors, and to verify that any employees who waived group coverage secured coverage elsewhere– unless they had a verifiable exemption.
–To operate in this environment, employers have had to acquire a new vocabulary, learning new terms and phrases such as: variable hour employees, measurement, administration, and stability periods, affordability safe harbors, 98% offer method, qualifying offer method, transition relief, 1094 transmittal forms, and 1095 forms, aggregated, full time equivalent, minimum essential coverage and minimum value.
–Most employers entered the reporting period vastly unaware of the requirements. They had not established measurement periods and were not tracking variable hour employees’ hours or properly assessing the affordability of their offered plans.
–Employers learned—sometimes, too late—that if they were part of a controlled group, they should have aggregated their employee count to determine whether or not they were considered part of a large employer. Others learned—also at times too late—that they were able to avoid penalties for the 2015 plan year, given that coverage was required to be offered to only 70% of their full time equivalents. But employers quickly realized they would need to make changes to meet the 2016 threshold of offering coverage to 95% full time equivalents.
–The 1094 and 1095-C reporting forms proved to be daunting, complicated and confusing. Numerous companies outsourced this task only to discover that their vendor was unwilling or had limited expertise in providing codes and guidance regarding measurement periods, affordability safe harbors and supporting technology. Employers also began to recognize the value of having an automated benefits enrollment system that can streamline the reporting process. Both employers and their employees also learned the importance of providing information on dependents, regardless of whether or not they were enrolled in the company’s health plan.
–Typically, employers chose to: 1) Do the reporting themselves; 2) outsource to their established payroll vendor; 3) hire a third party administrator; 4) outsource to their CPA or accounting firm, or 5) engage an employee benefits firm to work with their HR personnel to provide the service. Regardless of which approach they took, there was a learning curve for all parties. This led to unfulfilled expectations, more than anticipated manual entries on the part of the employer and missed deadlines.
All of this, however trying, laid a basis for establishing a far more efficient, timely and accurate reporting process for the 2016 plan year. Here are a few key guidelines:
–Employers should conduct debriefings that include any third parties to determine what worked and what did not for the 2015 plan year. These meetings should be used to clarify expectations for the coming year and may lead to changes in outsourcing arrangements—with companies either switching service providers or bringing the reporting duties in house.
–This should be done without delay. Measurement periods should be established and tracking variable hour employees should begin right away. Employers should also immediately confirm that they are offering benefits to at least 95% of their full-time equivalents and that at least one health plan offering meets the established affordability and minimum value thresholds.
–Reporting practices should be documented to create a record of procedures to be followed going forward.
–And finally, employers should audit their personnel records to confirm that employee social security numbers and legal names are recorded and accurate. Omissions and inaccuracies caused many filings for the 2015 plan year to be ‘accepted with errors’ by the IRS and need to be rectified in the allotted time frame.