This article was updated on June 13, 2018.
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. But 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.
1. Consolidated Data
It's a good idea to implement a monthly process for reconciling the information you'll need for ACA reporting to the IRS so you're not sorting through a mountain of data in January. 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 family members that enroll along with the employee. 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.
It's important to review how your HR and benefits administration practices translate into ACA compliance. For example, do you update an employee's status as you go, or in batches that can put your records behind? Doing things as you've always done may not be adequate for what the ACA requires in terms of 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 compliance risk.
2. An Aligned Hiring Strategy
Finance leaders and HR leaders should work together to ensure the organization's hiring strategy not only aligns with the organization's overall goals, but that it's also compliant 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're going to 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.
3. Coverage Offers
To avoid the employer mandate penalty, full-time employees and their dependents should be offered affordable coverage that provides minimum value no later than the first day of the fourth full calendar 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.
4. Employee Status
If you have workers who start out as seasonal or variable hour employees, you'll need to exercise due diligence in terms of tracking their status. If your tracking indicates that seasonal or variable hour employees are full-time, you'll need to ensure a smooth process for offering them coverage.
It is critical to understand there is a 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 were using to determine whether they were considered full-time.
Having a process and HCM system in place to double check employee statuses on a monthly basis will ensure changes in employee classifications don't go unnoticed.
5. 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 with addressing marketplace notices on a year-round basis 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.
Read how Elwyn, Inc. automated their health care 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 system for managing your ACA compliance process.
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