ACA Checklist: A Due Diligence Checklist for ACA Reporting

A Due Diligence Checklist for ACA Reporting

It's important to evaluate how your and benefits administration practices help (or hinder) ACA compliance.

A due diligence checklist for ACA reporting

It's important to evaluate how your benefits administration practices help (or hinder) ACA compliance.

With the Affordable Care Act (ACA) employer mandate still in effect, organizations realize that being willing to offer high-quality benefits is only half the battle. The employer mandate — officially known as the employer-shared responsibility provision — also requires a significant amount of data tracking and reporting.

Your benefits package is a key aspect of attracting and retaining talent in your workforce. However, the ACA's filing requirements can be a complicated addition to your overall benefits strategy. And while the law may someday change, until it does, employers need to comply.

Here's your due diligence checklist for ACA reporting.

Consolidated data

Implementing a monthly process for reconciling the information you'll need for ACA reporting to the IRS is a good idea so you're not sorting through a mountain of data at year-end. Track coverage offers you make to your employees at the time of hire and during your annual open enrollment period.

You'll also need to keep track of whether employees accept or decline your offer, and if family members are part of the enrollment. You'll need details about each employee's monthly share of premiums for employee-only coverage for the lowest-cost plan you offer (that provides minimum value), and the affordability safe harbor method you're using.

Reviewing how your HR and benefits administration practices translate into ACA compliance is important. For example, do you update an employee's status as you go, or do you do it in batches that keep your records from being current? Doing things the way you've always done them may not be adequate for what the ACA requires regarding notices or reporting. You may have proper business practices, but if your systems do not capture the data properly, that could put your company at risk of non-compliance.

An aligned hiring strategy

Finance leaders and HR leaders should work together to ensure the organization's hiring strategy not only aligns with its overall goals but also complies with the ACA. If your organization relies on independent contractors, seasonal employees or variable-hour employees, you need to verify you're using these terms as defined in the ACA and by the IRS and DOL.

If you're not offering health benefits to seasonal employees who work 30 or more hours per week for eight months of the year, you will run into potential penalties from the IRS. And if you're avoiding offering coverage by using independent contractors instead of W-2 employees, be aware that the IRS and DOL are focusing considerable audit efforts on employee misclassifications.

New employees are hired throughout the year, so it may be useful for finance leaders and HR leaders to periodically review the organization's current hiring and benefits information to ensure ongoing compliance.

Coverage offers

To avoid the employer mandate penalty, full-time employees and their dependents should be offered affordable coverage with minimum value no later than the first day of the fourth full month of employment. If you hire seasonal and variable-hour employees, you must track their hours using either the look-back measurement method or the monthly measurement method, according to the IRS.

Be sure you include all paid hours, including the time the employee isn't actually working, such as sick leave, vacation time or jury duty.

Employee status

If you have workers who start as seasonal or variable-hour employees, you'll need to exercise due diligence to track their status to determine if they meet the requirements of a full-time employee per ACA standards. If you determine that a seasonal or variable-hour employee is full-time, you'll need to ensure a smooth process for offering them coverage.

It is critical to understand the difference between how HR typically defines "full-time" (40 work hours a week) and how the ACA defines it (30 hours a week or 130 hours a month).

Remember, if the employee is working full-time according to ACA, you'll need to offer health benefits by either the first day of the fourth calendar month after the employee becomes full-time or the end of the initial measurement period you used to determine whether they were considered full-time.

Having a process and HCM system in place to double-check employee statuses every month will ensure changes in employee classifications don't go unnoticed.

Marketplace notices

You should also have a plan for handling marketplace notices on a monthly basis. If you've offered affordable, minimum-value coverage to an employee for whom you receive a marketplace notice, you'll want to appeal the notice within 90 days. If the employee should have been offered coverage under your benefits plan based on the ACA's rules, your due diligence in addressing marketplace notices year-round could mitigate potential penalties down the road.

Your efforts throughout the year to ensure your employees are properly classified, and to accurately track hours, benefits eligibility and offers of coverage, should result in fewer penalties and a smoother process when it's time to file your ACA informational reporting with the IRS.

Go deeper

Read how Elwyn, Inc. automated its healthcare reform compliance process.

For more Health Care Reform insights and sample penalty letters/responses, watch ADP's webcast Workplace Compliance Spotlight: It's Been Quiet on the Health Care Front … Or Has It?

Learn about ADP's solution for managing your ACA compliance process.

Subscribe to ADP's Eye on Washington legislative alerts to stay up-to-date on the latest changes.