A Survival Guide for ACA Reporting and Compliance

With open enrollment well underway for most organizations and the end of calendar year fast approaching, it’s time for HR departments to focus on Affordable Care Act (ACA) reporting for plan year 2017. Though HR teams have a few years of experience navigating the ACA reporting requirements under their belts, confusion and stress levels continue to run high.ACA

In fact, according to Guardian Life Insurance research, seven in 10 companies feel unable to keep up with today’s constantly changing legislation. On top of planning for 2017 reporting, the Internal Revenue Service (IRS) recently announced that they have begun mailing proposed penalty notices to employers for filings made for the 2015 plan year.

ACA compliance doesn’t have to be a daunting task. If HR pros understand the legislation and what’s required of their organization, and abide by a few compliance and reporting best practices, they can reduce the likelihood of trouble down the road.

Employer Responsibilities under the ACA

Despite partisan politics and President Trump’s insistence that he would not enforce certain aspects of the Obama-era health care bill, it’s still the law of the land. Unfortunately, some organizations – either knowingly (expecting its repeal) or unknowingly – may have overlooked their responsibilities under its provisions. Especially considering recent reports that the IRS is beginning to beef up its enforcement of the employer mandate, companies should have compliance at the top of their priority lists.

Employers that are not compliant with current regulations face major penalty fees, which range from $2,080 to $3,120 per employee depending on the violation. The Congressional Budget Office and the Joint Committee on Taxation estimate U.S. employers will pay out roughly $207 billion over the next 10 years, which—adding insult to injury—are not deductible business expenses. For smaller organizations, ACA penalties could spell disaster for the bottom line.

Small businesses face the same challenges as large, multinational enterprises with diverse workforces and plan options—and often have more part-time employees to track for ACA compliance and reporting. Data required to produce ACA required forms (i.e., form 1095-C and 1095-B) too often exists in different disconnected sources, or isn’t updated on an ongoing basis.

To avoid future bottlenecks in the reporting process, HR pros should make compliance a year-round priority by establishing information-gathering procedures in the departments who manage data required for ACA reporting. Payroll departments should track hours worked, benefits departments should track offers of coverage and enrollment, and the accounting department should keep track of EINs, legal entities and other information required for IRS filings.

HR is accountable not only for collecting the data required for timely ACA filings, but perhaps more importantly, the accuracy of that data. Common issues for employers in their first year of reporting included incomplete dependent data (e.g., names, social security numbers, etc.), and incorrectly assigned safe harbor codes.

With HR teams already stretched to the max with other aspects of ACA compliance, employers who opted to save money by attempting to handle employer shared responsibility reporting in-house are finding that going it alone was not, and is not, always the best option. HR teams should lean on ACA experts and brokers that offer services such as reporting and data tracking, affordability calculations, form preparation and audit support.

Beyond the expertise that these firms bring – enabling them to point out potential problem areas before they become problems – the support provided can help employers gain back valuable time and resources for other initiatives.

What If the IRS Comes Knocking?

Compliance under the ACA, however uncertain its future may be, is mandatory. And with the IRS sending out penalty letters for the 2015 plan year, many employers will find themselves simultaneously juggling ongoing reporting requirements with appeals, penalties and remediation of past filings. If the IRS should come knocking, here’s what do to:

  1. Contact corporate counsel immediately. Ignoring the notice in the hopes that enforcement will be dropped is not an option. Having the company lawyer on hand is a must for any penalty assessments filed against the organization.
  2. Look back at previous filings to uncover any overlooked errors. Now that the IRS has devoted time and resources to ACA enforcement, it would behoove employers to review filings from several years back to catch inadvertent coding or data errors that may now be more obvious. Identifying errors in past filings before the IRS comes calling will better prepare you for those conversations—and increase the likelihood that your current year filings will be accurate.
  3. Prepare for some discussion, and know the company’s rights. While some employers don’t always get it right, clearly the IRS doesn’t have it all figured out either—it’s taken 2 years to get processes, systems and funding in place to properly enforce the mandate. HR departments have 30 days after receiving a penalty notice to contact the IRS to register their intent to dispute and provide corrections.
  4. Get organized and get ACA-compliant for the future. From all indications, the IRS intends to enforce both the employer and individual mandates until and unless those provisions of the ACA are repealed. As such, all employers should be prepared to complete the required filings for 2017 and beyond.
Denise Kappler is SVP of client services, and Kim Buckey (@SPDkim) is VP of client services, for DirectPath—an employee engagement, health care transparency and compliance firm for Fortune 1000 employers (@DirectPathHLTH).