With year-end reporting activities approaching, employers must direct their attention to fulfill ACA, IRS, and state reporting requirements.

As we edge toward the end of a very challenging year for many, businesses must now turn their attention to 2020 year-end reporting — which includes those associated with the Affordable Care Act (ACA) and other regulatory requirements. Yet the COVID-19 global health event continues to drive changes in how businesses are operating, which, for many, included the need for furloughs and layoffs. How will these actions impact a company's ability to satisfy ACA and state reporting requirements?

The impact of COVID-19 on year-end reporting

In the best of times, every industry experiences periods of hiring and downsizing, but this year has resulted in a seemingly never-ending series of decisions to restructure the workplace. While the forms associated with ACA reporting may not look different to employers, the patterns of populations of employees on leave, furlough, then either returning to work or being terminated may be quite different. COVID-19's impact creates an even greater need for more tracking and monitoring of every employee's status throughout the year. It is such changes in "normal" patterns that must be watched closely so nothing slips by without being addressed.

Better data management and reporting practices help companies keep leave and furlough data updated so that returning employees are measured correctly, and other employees who experience differing leave durations are measured and offered benefits appropriately.

For example, we've watched many companies place employees on extended leave, change their work locations, change FEINs and assignments, as well as embark on efforts to reconfigure their staffing models permanently. Rarely do companies pursue such large changes in their staffing all at once. Yet the challenges associated with COVID-19 forced dramatic changes, within an incredibly short period. Any one of these changes could affect reporting and tracking associated with ACA reporting requirements.

If employees are not measured correctly, or offered benefits incorrectly, too late, or not at all, there's the potential for significant penalties. For example, changing an employee's work location, which is a routine occurrence in today's environment, could trigger a change in reporting at the state level. While many businesses used to possess the financial wherewithal to absorb penalties, in a challenging economic environment, the impact of a penalty could create severe, long-lasting repercussions.

States move to help displaced employees

What about the actions taken by states and their implications for ACA reporting? To help those who lost their coverage due to a COVID-19-related job loss, many states offered extended enrollment periods. An extended enrollment period does not typically impact employers. Employees who lost coverage (furloughed without benefits, terminated, etc.) would have been eligible for enrollment on the exchange due to a life event.

Generally speaking, the extended enrollment period does not impact employers as this is part of the established and usual process. It simply provided a longer window for individuals without access to coverage to consider options on how to continue coverage. Should an employee gain coverage and be granted a tax credit or subsidy, an employer may see an exchange notice. Nonetheless, if the employee was not offered benefits properly during this time and gains coverage and a tax credit from the exchange, this may translate later into a potential ACA IRS penalty.

As for the impact on year-end reporting, if the employee loses coverage due to termination, furlough or other usual policies from an employer, the extended enrollment period does not impact employers nor their year-end reporting.

Avoiding penalties requires technology and relevant expertise

Given the degree of turmoil experienced by many employers in 2020, the key for ACA reporting is to be diligent about tracking and documenting changes in the workforce as they happen. By continuing to track ACA eligibility on their own, employers may misapply measurement rules, miss offering benefits, mishandle rehires or new hires with prior employment and potentially open their organizations to additional penalty risk.

Achieving compliance requires access to technology, backed by relevant domain expertise. If organizations don't have a robust ACA solution with intelligent technology (i.e. comprehensive compliance calculations which include automated rehire logic, constant data hygiene, etc.) this is the time to focus on addressing that deficiency.

With this support in place, an employer can rely on technology to provide automatic calculations to determine full-time measurements. This ensures that your company does not miss the right time to offer benefits. And that could spell the difference between compliance and potentially being on the receiving end of penalties.

Learn how ADP can help your organization meet the demands of the evolving ACA landscape.

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