Are you ready for reporting season? A recent Employee Benefits News webcast introduced viewers into the top six keys for applicable large employers looking to minimize compliance risk, avoid fines and penalties, and push the needle toward the 95% requirement for employers (100+ FTEs) as they head into the upcoming reporting year.
1. The Importance of Having the Right Data
Data is the heart of a well-defined ACA Strategy. But for many organizations, managing the deluge of data generated is a top concern, especially when that data is being generated from and stored in multiple incompatible locations.
Mismatches, overlaps, leaves of absence, third-party data, and benefits changes among employees all need to be addressed in order to minimize risk and offer coverage. The EBN webcast highlighted four checkpoints for employers heading into reporting season 2016:
- Schedule regular meetings with all data stakeholders to prevent delays or disruptions
- Perform regular spot checks to ensure accuracy and to make year-end validation and reporting easier.
- Ensure regular transmission of all data from third-party data providers.
- When looking at new software platforms or service providers, look to understand how each will impact your organization’s ACA compliance.
2. Tracking both Eligibility and Affordability
Working to affordably insure eligible employees can be rife with pitfalls for some employers—especially those with complex business structures which have multiple employer identification numbers, employee designations, and more.
With this in mind, both single EIN employers and controlled group ALEs with multiple employer groups need to be able to manage the following:
- Employee Designations: Full-Time, Part-Time, Variable, Seasonal
- Affordability Safe Harbors: Federal Poverty Line, W-2, Rate of Pay
- Measurement Methods: Lookback, Monthly
- Measurement Periods: Standard Measurement Period (SMP), Standard Stability Period (SSP), Initial Measurement Period (IMP), Initial Administrative Period (IAP), Initial Stability Period (ISP)
- Reporting Methods: 1094-C, 1095-C
Knowing this, if you offer minimum essential coverage to employees and they opt to enroll through the exchanges, effective tracking is important so that you can successfully appeal any penalties.
Additionally, complexity occurs if an employer is late to offer coverage to employees following the initial measurement and administrative period, fails to measure breaks in service correctly, or incorrectly manages employee reclassifications. The webcast offers the following four tips for employers:
- Review Eligibility Results from 2015. Did Results Meet Your Expectations?
- Monitor related metrics including average hours worked, hiring rate, and turnover rate for variable or part-time employees.
- Document your strategy and methodology for 2016 including designations, measurement methods, and affordability safe harbors.
- Ensure you’re able to track designations, reclassifications, LOA, and more.
3. Monitoring Monthly
If you’re waiting until the end of the year to monitor and mitigate risk, you’re setting yourself up for a higher likelihood that you will be subject to fines and penalties. For ALEs, fines are incurred monthly, so for an “A” fine (failure to offer coverage), you would be charger $180/month per employee, and $270 per month for a “B” fine (unaffordable coverage)
To ensure you’re doing it right heading into 2016 reporting season, consider the following:
- Assess internal readiness; do you have the data and tools in place to monitor monthly results?
- Develop an internal communication plan, ensuring that clean ownership is established among stakeholders and leadership
- Have policies in procedures in place for risk mitigation (e.g. what actions will be taken if compliance results fall below the desired threshold)
4. Efficient 1095/1094 Reporting
The IRS transmittal process is lengthy, complex, and has many pitfalls that employers must avoid. In filing Form 1094 to the IRS, and 1095 to both the employee and the IRS, the process to file directly with the IRS is as follows:
- Obtain Transmitter Codes
- Test in the AIR (ACA Information Return) System
When filing, there are multiple feedback statuses and action required if something is incorrect or rejected altogether, with the two most common errors resulting in rejection being non-matching a) FEIN and Employer Name, and b) SSN and Employee Name.
The EBN webcast recommends the following best practices to avoid errors and minimize the risk of your forms being rejected:
- Have a defined testing window with ample time for data validation. Then test again!
- Confirm expectations with external vendors to clarify ownerships of data preparation, printing and mailing, and IRS file transmission.
- Ensure you are doing solicitations for TIN validations throughout the year and have evidence that good faith efforts were made.
- Make sure the system/vendor you are using performs pre-validation checks that align with the AIR schema and business rules.
5. Watching the Impact of Subsidies and Appeals
Mentioned earlier, the impact when employees collect premium tax credits (subsidies) can be substantial. If you offer insurance to an employee, and he or she opts to choose coverage on the marketplace, you will be notified by the exchange if subsidies are awarded and have 90 days to file an appeal. A few examples of this:
- John worked 25 hours per week, and his employer did not offer him coverage. On his subsidy application, John stated he was not offered coverage from his employer, but also stated that he was a full-time employee. He receives a subsidy. Employer action: Appeal.
- Judy worked 40 hours per week, her employer offered compliant coverage but she declined. On her subsidy application, she stated that she was not offered coverage. Judy Receives a subsidy. Employer Action: Appeal.
This marks why it is so important to document pertinent employment information, coverage offers, employee designations, and the like, so if and when you receive a subsidy letter, you can file a timely and accurate appeal.
6. Employee Communications
While all of this may be complicated for you, if you don’t properly educate employees about what all of this means to them, employees will be pounding on your door demanding answers. It pays to communicate information to employees early and often, using the most effective delivery channels and messaging in order to avoid a flood of questions in the future.
- Don’t underestimate the importance of the marketplace notification.
- Educate employees about the 1095 early and often.
- Have a plan to handle and respond to employee inquiries during and after tax season.
- Don’t manage subsidy appeals in a vacuum! Consider employee impact as part of the decision and management process.
Conclusion: 95% is the new 70%, 50 is the new 100
The definition of Applicable Large Employer has expanded to include employers with 50 or more FTEs, and employers are now required to offer affordable coverage to 95% of employees. Learn more by downloading the Employee Benefits News and Equifax webcast, The road to 95%: Mastering ACA compliance in 2016 and beyond to learn more about the steps you need to take to efficiently measure, manage, and report under the increasingly stringent policies.
For even more, see the 2016 ACA Checklist, which provides detailed information on the tasks you should be completing yearly, monthly, and constantly:
- Tasks you should be continuously tracking: Recordkeeping of every employee’s hours of service (hours that an employee is available to the employer in addition to paid hours on the job).
- Monthly tracking: IdentifyingACA-defined full-time employees who are eligible for health insurance (Here’s how),Reviewing the list of newly eligible employees (and the consequences for not doing so), Testing affordability for employees, and keeping records of every calculation and each determination.
- Year-End To-Do List: At the end of the year, employers who have accurately tracked data have an easier time producing a 1095-C (with monthly breakdowns), and filing copies of employee forms using the 1094-C transmittal form.
For more information, download the infographic from Integrity Data by registering to receive the 2016 ACA checklist here, and watching a recent Brittenford/Integrity Data ACA Compliance Checklist webcast to learn more.