Affordable Care Act Reporting -- Do Your Clients Have an Action Plan?

1. Would you like to help your clients comply with Affordable Care Act (ACA) IRS reporting and mitigate noncompliance penalties?
2. Do you need an action plan to avoid last-minute reporting headaches?

If you answered “yes” to either of these questions then please keep reading.

The ACA remains the law of the land, so employers must continue to comply with the Employer Mandate. Applicable Large Employers (employers with 50 + full-time-equivalent employees) continue to have the opportunity to comply using affordable, accurate, and secure 1095/1094 reporting technology. The longer you wait, the bigger the penalty. Help protect your clients: Take action now.

Step 1 – Find a 1095-C/1094-C Vendor

Given the ACA rollercoaster since November 2016, fewer 1095-C/1094-C vendors are in business today. To compound the matter, the recent security breach at Equifax and the price gouging by big outsourcing companies makes it more difficult to find a proven, credible, and affordable solution. The good news is that a handful of boutique firms now offer standalone, easier-to-use solutions.

The best solutions:

1. Only require about 18 data elements (demographic, hire date, end date, and benefit dates)
2. Are HIPAA-compliant
3. Calculate the line 14 and line 16 codes
4. Embed internal controls
5. Provide dedicated account managers
6. Offer data management (since clients often struggle combining payroll and benefits data)
7. Understand the importance of quality assurance

“Standalone” is the critical item here since there are so many different payroll systems. To that end, a good choice would be a system that can accept data from any system. Equally important, the vendor should offer data management services if the client has data management challenges.

Step 2 – Help your client prepare its data

Preparing data doesn’t have to be as challenging as it has been in the past. You no longer need to figure out the respective line 14 and line 16 codes manually on a month-by-month basis. The better systems only require approximately 18 data elements for insured plans. Most of the required data resides in your client’s payroll system. Benefits data, including benefits start date and benefits end date, is available in most benefits systems or carrier enrollment files.

The good news is you don’t need a programmer if you know how to use VLOOKUP tables in Excel. Simply connect the data using a common employee identifier, such as Social Security Number and you now have a forms-ready data file.

If you don’t know which employees are ACA eligible, eligibility can be determined using timekeeping software, such as TSheets. Hours-worked transactions can easily be imported into any ACA hours tracking software.

Step 3 – Document Your Client’s Efforts

Like other important financial reporting, it is very important to document all steps. This will provide an audit trail in the event of an audit. Even though the industry is speculating that audits are months away, as more time passes, it’s more likely that what was done and how it was done will become a fleeting memory. As a result, an audit will be even more painful if steps are not properly documented.

Step 4 – Get Ready for Marketplace Subsidy Notice Appeals

Since the ACA remains the law of the land, it is likely that your clients will receive considerably more Exchange Subsidy Notices. These letters pertain to employees who erroneously purchased health insurance on www.Healthcare.Gov even though they were not eligible to do so.

In the event an employee was not in fact eligible for a subsidy because he or she was offered employer-based insurance, the IRS will “claw back” the subsidy from the employee. It is important to note that these notices are sent to the employee’s work location, which may differ from the location of your client’s CFO. An employer has only 90 days to appeal, so it’s critical to instruct each worksite location to be on the lookout for these notices. To appeal, your client will need copies of all documentation showing offers of coverage and other pertinent information. Employees also have an opportunity to appeal their employer’s appeals. A final determination in an employee’s favor could trigger a 1095 audit for your client.

Step 5 – Prepare for a 1095 Audit

The likelihood of a 1095 audit is greatest for non-filers. In fact, according to a recently published U.S. Treasury audit that evaluated the ability of the IRS to enforce the Employer Shared Responsibility Provision, the IRS is now prepared to start mailing audit notices to non-filers. Since about $20 billion in non-filing penalty revenue could be recognized by the IRS this will further fuel penalty notice efforts.

Moreover, given the wide variety of content that is contained on a 1095-C form, an audit will likely include a review of the supporting insourced and outsourced processes and technologies used in the payroll, HR, benefits, and health insurance areas. As a result, a 1095 audit can cost even more than the IRS penalties because the outcome could also include business process improvements and technology upgrades.

More specifically, the scope of a 1095/1094 audit could include:

• Related business entities
• ACA-eligible employees
• 1095-C recipients
• Dependent Social Security Numbers (for self-insured plans)
• 1095-C offer-of-coverage accuracy
• 1095-C safe harbor/status accuracy
• Affordability
• 1094-C IRS filing

 For more information please visit www.1095audit.com.

Blog prepared by: Howard Gerver, President, ACA Managed Services