By Cassandra Balentine
Changes under the Affordable Care Act (ACA) include mandated compliance standards as a condition of participation. Employers now have new risks and increased complexity to contend with. These regulations require employers to offer affordable healthcare coverage to eligible employees and report compliance to the IRS for the tax year 2015. Workforce management software solutions help address these new standards for employers.
Parker Conrad, co-founder/CEO, Zenefits, points out that beginning in 2016, all companies offering healthcare coverage must file annually to comply with ACA regulations. “It’s mandatory for the first time in 2016, and it’s like doing another tax return,” he explains. The deadline is February 29, 2016 for paper filings and March 31, 2016 for electronic filings.
Applicable large employers are responsible to meet these regulations. “The ACA statute and IRS implementing regulations make it clear that applicable large employers are organizations that have 50 or more full-time employees—on average—during the prior year,” says Jim O’Connell, executive consultant, Ceridian. “For 2015 only, the Employer Shared Responsibility mandate applies to employers that have 100 or more full-time employees,” he adds.
In addition to filing, employers are to notify employees of information being sent to the IRS. “Employers may satisfy this requirement by sending a copy of Form 1095-C, where applicable, and Form 1095-B, where applicable. These have an earlier deadline of January 1, 2016,” explains Conrad. He adds that failure to comply and file forms with the IRS, or even missing the deadline or sending in the wrong form could mean penalties of $100 per employee. Additionally, employers may pay penalties for not offering insurance.
Challenges of ACA Compliance
While the importance of meeting regulations is clear, organizations face many challenges in meeting compliance mandates.
“One of the biggest issues with compliance is the need to stay current,” shares Paul Kramer, esq. director of compliance, WorkForce Software. He says the ACA is a prime example. “The law has changed so many times that many employers are still unsure about how and when to demonstrate compliance. Add that to the myriad of other compliance regulations—including the latest wave of local paid sick leave laws—and it is extremely difficult for employers to keep up with the pace of regulatory compliance processes,” he says.
Conrad explains that in his experience, employers have three big challenges in complying with the ACA. First is the employer mandate, the stipulation that requires any employer with more than 50 full-time or full-time equivalent employees to offer health insurance to full-time employees. “This sounds simple enough, but there are complicated rules about how to calculate who is a full-time employee and when they have to be offered health insurance, as well as what counts as offering them health insurance,” he warns.
Secondly, employers must offer the right insurance. “The coverage has to meet certain requirements. Health insurance must be affordable as defined by employee contributions being less than or equal to 9.5 percent of W-2 wages, by the pay rate, or the federal poverty line. Coverage must also meet minimum value standards as defined as actuarial value of 60 percent,” says Conrad.
He adds that after employers have determined their full-time employees and coverage, it must be reported to the IRS to verify compliance.
“The reporting requirement could prove to be the ACA’s most demanding employer compliance mandate,” says O’Connell. “On the basis of coverage data analytics tracked throughout 2015, employers must file detailed information returns with the IRS and furnish corresponding statements to full-time employees early in 2016. Among other things, these reports must contain specific information about offers of minimum value coverage to employees and their dependents, the employee monthly premium share, and affordability safe harbors,” he adds.
Collecting and managing data is challenging. “The data needed to complete ACA IRS Forms 1094 and 1095—such as human resource, payroll, benefits, and leave of absence data—resides in multiple locations or systems, if anywhere,” explains Kristin Lewis, senior director, product management, Equifax.
She says that in fact, the ACA requires employers to track and report net new data that has never existed, such as employee designations and measurement periods. “Since this data will be used as the foundation for complex calculations that will determine employees’ eligibility for health benefits and how much premiums should cost to be considered affordable, ensuring accuracy and validity is critical,” explains Lewis.
Workforce software can reduce risk by helping employers automate the manual processes and administrative duties that come with ACA compliance.
John Anderson, senior director, product marketing, Kronos Incorporated, says that the impact of the ACA goes beyond measuring and reporting with homegrown or paper-based reporting without putting the business at risk. “Organizations that understand ACA implications utilize workforce management solutions that provide complete automation and high-quality information for driving cost-effective decisions and minimizing compliance risk.”
Anderson explains that many workforce management solutions, including human resources, time and attendance, and payroll applications, have proactively added ACA-specific features to manage compliance. He suggests organizations consider three simple questions when evaluating workforce management technologies. Does your system track and report full-time/part-time mix on a weekly basis? Are your time and attendance systems tightly integrated with human resource and payroll so that benefits plans are extended to newly eligible employees and deemed affordable based on their wage range? And finally, can your system alert managers when an employee’s scheduled hours have put them into full-time status so that they can manage in line with your organization’s ACA strategy?
Workforce software solutions help address these concerns by simplifying and automating payroll processes.
Ceredian offers Dayforce HCM, a cloud-based human capital management (HCM) solution to address the administrative overhead the ACA has introduced in order to offer benefits programs that are compliant with the eligibility, affordability, and reporting requirements that employers face.
Dayforce HCM allows employers to collect and categorize service hours, identify benefit eligible employees, facilitate employee benefits-enrollment, manage employee measurement and stability periods, evaluate affordability, and complete year-end filing.
Equifax offers its ACA Management Platform, which manages complex eligibility and affordability calculations, alerts employers of potential compliance risks, and automates IRS Form 1094 and 1095 preparation and distribution.
“The platform aggregates the necessary data from any source in our system to track hours, determine eligibility, predict future enrollment volume, and provide alerts for potential compliance risks and penalties,” says Lewis.
Additionally, the Equifax compliance scorecard allows employers to see an estimate of potential penalties by month. The employer profile view provides detailed insight into each employee’s eligibility and compliance history.
Kronos offers a variety of applications within its latest version to address ACA management and employee engagement, including time and attendance, scheduling, and human resources.
Kronos’ Anderson says many of its clients cite ACA needs as a major reason for choosing their product. “Unfortunately, when it comes to the ACA, there is no one-size-fits-all option, so the flexibility is crucial,” he says.
Anderson adds that organizations of all sizes across all industries are increasingly aware that their managed workforce is the face of their business. It’s their greatest asset and not merely an expense to be managed. He adds that the complexity and administrative burdens of workforce compliance are on the rise. “The ACA is just one example. Fair Labor Standards Act (FLSA) changes, minimum wage increases, and new labor regulations have all recently been proposed or enacted, facing employers with the dual task of nurturing a culture of employee engagement while also staying on top of compliance,” he adds.
WorkForce Software’s EmpCenter Solution can help employers accurately identify which employees must be offered health coverage under the ACA.
“What large employers need is a solution like WorkForce Software’s EmpCenter to automate and streamline compliance processes so that changes in the law can be reflected in the system more readily, taking the stress out of staying compliant,” says Kramer.
WorkForce EmpCenter is configurable so that adjustments are made quickly when the laws change. “In addition, we stay on top of regulatory changes—like new or expanded regulations—and update the software to reflect the latest compliance requirements. This allows us to offer more thorough compliance coverage than any other vendor on the market.”
Kramer says WorkForce’s tracking capabilities are designed to address ACA mandates for customers. “Tracking hours for ACA compliance can be complex, depending on the types of employees you have. For example, an employee is considered full time for ACA reporting purposes if he or she averages at least 30 hours of service per week or 130 hours for service per calendar month,” he says. He explains that this doesn’t necessary mean hours worked. “An ‘hour of service’ means each hour for which an employee is paid—or entitled to payment. This includes paid time off due to vacation, holiday, illness, incapacity, layoff, jury duty, military duty, or other paid leaves of absence.”
WorkForce Software’s EmpCenter solution tracks and reports hours worked and hours of service—to any degree of specificity required. “With unprecedented configurability, EmpCenter simplifies hours of service tracking so you can be sure that you’re using current, complete, and reliable data.”
Zenefits ACA Compliance Automation software keeps businesses in compliance with the healthcare law’s compliance rules and regulations, and does it all without headaches, paperwork, and fees, according to Conrad. “The Zenefits platform makes what could be a burdensome, complicated, and costly process not just easy, but automatic. It links payroll, company, and health insurance data to generate and automatically file the completed 1094-C and 1095-C forms with the IRS,” explains Conrad.
Workforce software solutions handle employers’ abilities to manage payroll functions to ensure proper payment and tracking of employee hours as well as help businesses remain compliant.
“The most important thing you can do to simplify compliance is to choose your workforce software vendor carefully,” suggests Kramer. “Find out what they’re doing on their end to maintain compliance updates for you so that you don’t have to continually research and anticipate regulatory changes.”
The challenges and risks associated with non compliance is real, and the landscape is increasingly complex. It is difficult for businesses to stay on top of all the changes and a variety of software vendors are ready to help. SW
Feb2016, Software Magazine