While the Affordable Health Care Act (ACA) turned 13 this year, it is still causing organizational challenges for HR leaders and benefits brokers alike. Nearly three-quarters of employers say that ACA compliance is overly or somewhat burdensome. In fact, 69% of employers say they spend more than 80 hours a year just on ACA compliance.
The stakes have never been higher, with IRS penalties for non-compliance increasing this year. Employers depend on their brokers to be trusted partners, to guide them through the ACA compliance process, and to assist them if they do face possible penalties. Missteps carry both reputational and financial risk for brokers if the proper precautions aren't taken.
How can brokers help? First, it's important to understand which ACA violations are most likely to occur. In short, most violations center on poor employee data collection, failure to report properly to the IRS, and not notifying employees about their ACA eligibility or enrollment.
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For example, one of the most common violations is when the employer doesn't offer Minimum Essential Coverage to at least 95% of its full-time employees and dependents. Another common violation happens when an employer doesn't provide the correct 1095-C payee statements to their employees.
The penalties aren't insignificant. They can range from hundreds of dollars per employee per year for some violations to hundreds of dollars per employee per month when coverage thresholds aren't being met.
Effective management of ACA compliance requires employers to have access to accurate data that's not always readily available or not in an accessible format. Compliance efforts are further complicated when employers need to rely on multiple sources of data. Finally, as health care provisions continue to become more comprehensive, so does the role of HR, and staying abreast of it all is key.
Benefits brokers are in a unique position to help employers comply with the ACA. As knowledgeable professionals who stay up-to-date on the latest regulations and best practices when it comes to providing employee benefits, brokers can support employers in a number of ways.
Here are three important areas of ACA compliance where brokers can help employers prevent many of the most common and often expensive mistakes.
Keep accurate records from the start
Keeping accurate records and tracking employee hours are critical if employers want to remain ACA-compliant. Data accuracy helps ensure they can demonstrate compliance to the IRS. It also protects them against potential litigation. To accurately report on Form 1095-C, the IRS requires employers to keep detailed records of employee hours and wages, as well as records of any health insurance coverage the company offers. Failing to keep accurate records can lead to the costly fines and penalties mentioned above.
Brokers can play a supporting role by assisting with collecting, organizing, and transmitting the information required to produce these statements. Benefit brokers can provide up-to-date technology and software to help employers track employee coverage, hours worked, and other important data to ensure that they remain compliant with the ACA.
Brokerages can provide employers with continuous updates and insights regarding their compliance status, alert employers if they see compliance issues, and offer proactive solutions for addressing them.
Properly classify employees every time
Misclassifying employees is one of the most common ACA-compliance mistakes employers make — and one of the most heavily penalized. Misclassifying an employee has two costly consequences: It puts the employer at risk of stiff IRS fines, and it can lead to other legal consequences if the IRS determines their employees were denied benefits.
Brokers can support employers by educating them about the ACA's classification requirements — explaining the criteria for classifying employees as full-time, part-time, seasonal, or temporary. Brokers can also help employers determine which employees qualify for health benefits, based on their classification.
Employee benefit brokers can also assist employers in documenting employee status. They can guide employers on tools and techniques to help them keep accurate records of employee hours worked, so that they can properly classify employees. This documentation will also help employers prove to the IRS that they are complying with the ACA's employer mandate.
Help employers provide proper notices — always
The ACA has several notice requirements, including the Notice of Exchange Coverage Options, Employer Shared Responsibility Payment Penalties Notice, and Summary of Benefits and Coverage. Employers must provide these notifications to employees in a timely manner, and they must contain specific information to be considered compliant.
Employee benefit brokers can assist employers in understanding these requirements and what is required in each notice to ensure that they are compliant with the law. This can help employers navigate the complicated landscape of the ACA.
Brokers can provide guidance on the ACA's requirements, helping ensure that employers make informed decisions and comply with the law. They can also assist employers in understanding how to provide proper notices and ensure that they are delivered in a timely and accurate manner.
Summing up
Employee benefit brokers can offer ongoing compliance support to employers. They can help employers stay up-to-date with any changes to the ACA's rules and regulations that may affect employee classification. Brokers can also offer guidance and support to employers to ensure that they are compliant with the ACA at all times.
Kelli Smith is the Director of ACA Services at Selerix Systems, with over 20 years in the benefits Industry. She provides insights that inform how ACA is managed, thereby helping solidify Selerix's position as a leader in ACA management.
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