When it comes to Affordable Care Act (ACA) compliance, you basically have two options: you can do the work yourself or outsource it. Outsourcing ACA compliance will add a line item to your budget, but it's a good strategy for avoiding the headaches that come with a do-it-yourself approach to ACA compliance and reporting. It should also make your organization less likely to face ACA penalties. Additionally, with changes to health care policy we may see this upcoming year and the uncertainly around the ACA, it may not make sense for an organization to expand staff, effort, and expense to handle this internally when the outcome is unknown.
There are two different types of penalties under the ACA. The first applies to noncompliance with the employer mandate itself — in other words, failing to offer full-time employees affordable coverage that provides minimum value. The second applies to failure to report the details to employees and the IRS accurately and on time.
You might be fulfilling the employer shared responsibility provision, but if you don't correctly report that to your employees and the IRS, you could face penalties as steep as $6 million in a calendar year (up to $3 million for failing to provide Forms 1095-C to full-time employees, and up to $3 million for failing to transmit Forms 1094-C and 1095-C to the IRS).
Avoid Penalties by Outsourcing
Avoiding ACA penalties is one big reason organizations opt to outsource ACA compliance. When you use a third party that specializes in ACA compliance, you don't have to become an expert or coach staff. Outsourcing ACA compliance means your data is professionally consolidated and accurately transmitted to the IRS.
There are some aspects of ACA compliance that your organization has to address. If you have 50 or more full-time equivalent employees and you're not offering affordable, minimum value health insurance to at least 95 percent of full-time workers, you're open to penalties if they end up getting coverage in the exchange and receiving a premium subsidy. If you're outsourcing ACA compliance, the agency you're using can explain this aspect of compliance, but it's up to you to follow through with the coverage offer.
For a lot of organizations, that's the easy part. You're willing to offer coverage as required. But how do you figure out the details of when coverage has to be offered, or whether the premium contribution you make is enough for the coverage to be considered affordable? What information do you report to the IRS and when? What do you do if an employee rejects your offer of coverage and purchases coverage in the exchange instead?
ACA Compliance Vendors
Outsourcing ACA compliance eliminates confusion around those types of questions. Someone else will handle tracking your employees' full-time status and maintain a record of coverage offers. ACA informational reporting to the IRS will be handled by your compliance vendor, and the vendor will let you know what information they need you to provide, which is easier than digging through regulations.
There's no one-size-fits-all solution to ACA compliance and reporting. For some organizations, an in-house solution can work well. But if you're considering outsourcing, you'll want to include "reduced exposure to penalties" as a major pro.
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