This article was updated on July 19, 2018.
By now, organizations are all too familiar with the Affordable Care Act (ACA), including reporting to both the IRS and employees. The purpose of that regulation is to quantify the "shared responsibility" between government and large employers to provide "minimum essential health insurance coverage" for eligible employees and their dependents. Employers may choose to outsource ACA compliance management.
5 Sound Reasons to Outsource
According to the Federal Register, and ushered in by ACA Section 6056 and other aspects of the law, a sizable group of employers designated as applicable large employers (ALEs) face requirements that might make the idea of outsourcing compliance appealing.
Here are five possible reasons:
- There are penalties for noncompliance. It could be much less, but the penalty for a large employer tops out at $3,178,500 for failure to file mandatory information returns, per Internal Revenue Code Section 6722. The penalty for failure to furnish a correct payee statement is also a maximum of $3,178,500 per year. Both penalties may apply in the event that an ALE fails to both file and furnish.
- There are shifting regulatory sands. According to the IRS, current regulations include what the IRS calls "Interim Guidance," covering topics such as protection for employers that contribute to multi-employer plans, requests for filing extensions and reporting of Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Organizations must offer affordable coverage to 95 percent of their eligible full-time employee population, which requires rigorous tracking.
- For most employers, ACA expertise has a minor place in the HR value chain. Acquiring and maintaining expertise in ACA is rarely central to the ability of an HR leader to contribute to the unique value proposition of an organization. By contrast, effective recruitment and retention programs can take into account the specific enterprise skills and domain expertise needed to broaden service or product offerings.
- Specialists may have professional contacts with regulators and consulting expertise. Most employers will not have the time or opportunity to nurture relationships with regulators, consultants and other experts who specialize in ACA compliance and related matters.
- The regulations are complex. Something as simple as counting the number of eligible employees for purposes of the regulation is easier for specialists equipped with multiple case studies and scenarios. For example, do you know if 1099 contractors are eligible? Seasonal employees?
Snares and Caps
If you have good reasons to swim upstream and manage your own ACA compliance program, JDSupra, a legal business consultant, points to three main compliance boxes you'll have to check:
- Information statements are due to employees no later than January 31 and to the IRS no later than February 28 (or March 31, if filed electronically).
- If your coverage plan is not on a calendar year basis, you may have to report data from two separate plan years on IRS 1064-C and 1095-C.
- You must at least try to comply. The IRS suspends normal penalty enforcement for those who make good faith efforts to comply.
For many employers mindful of the HR value chain, the necessity of remaining compliant with ever-evolving legislation will translate to a sound decision to outsource ACA compliance management.
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