This New/Confusion World of ACA Reporting

Why was this so painful & how has It changed the employee benefits marketplace?

by Mark Combs, CFA, CFP, REBC, RHU, GBA, ChFC, CLU

Mr. Combs is CEO of ACAReportingService.com, (a Sky Insurance Technologies Company) is a company dedicated to providing employers and their consultants with best-in-class solutions regarding their employee benefit programs. Visit ACAReportingService.com

The employee benefit marketplace continues to be in quite a state of frustration and confusion as the final deadlines for applicable large employers (ALEs) to provide forms 1095-B and 1095-C to their employees has arrived.

Despite this reporting rewuirement remaining in the national spotlight through virtually every employee benefit publication over the past 18 months, there still remain some employee benefit brokers and employers who are not even aware of the reporting requirements.

Others still believe that they do not have any requirements because their fully insured carrier is taking care of the reporting, which is of course only ½ of the truth. This is creating huge opportunities for the most prepared brokers.

How do I know this?

As the CEO of a firm who performs this type of reporting (ACAReportingService.com), we have had a front row seat from the very beginning. This has given us an interesting perspective into how this reporting is changing the game in a way that nothing has in the past.

I can say this with confidence because I have spent nearly 20 years in this industry making employee benefits sales, managing a $1M block of business, and growing an agency to become one of the most successful in the southeast.

Later we sold the company to a large national broker, and I turned my attention to developing solutions for this industry. Bottom line – I know what it is like to be an employee benefit broker, how to make sales and how to grow an agency aggressively. With all of that said, brokers should understand that it is my strongest belief that ACA reporting is changing the employee benefit marketplace in a way that few could have predicted and this is how it happened.

In the beginning …

In early 2015 when employers were faced with Affordable Care Act (ACA) reporting for the very first time, they asked their benefit consultants and CPAs how to best perform the reporting. These advisors then turned to the IRS guidance on reporting and began to explore what was necessary to correctly report.

After a bit of time in review, they quickly realized that creating this reporting themselves manually would be extremely complex. It was at this time that a rumor began to circulate in the marketplace that this reporting would be best performed by payroll companies. From the outside it seemed to make sense and so most employers received advice to engage their payroll companies to perform the required ACA reporting for 2015.

But there was a major problem on the horizon that very, very few people saw coming. As it turns out, the payroll information necessary to correctly perform ACA reporting is only about 20% of the total information needed. ACA reporting is in essence group medical plan reporting, and thus requires an intensive knowledge of how employee benefits work. You can learn more about what exactly this means by reviewing a blog post we recently released entitled “Is ACA Reporting

More Payroll or Benefits Related?”

As employers began to actively work with their payroll vendors to begin completing the reporting, the wheels began to come off of the bus. They quickly learned that in most cases their payroll vendors had almost no answers for even the most basic of employee benefit questions.

To further complicate things, the process developed by payroll companies has revealed how little they know about how employee benefits work. Also, very few payroll companies have staffed appropriately. This has left employers quite anxious and frustrated over their choice of ACA reporting vendors. You might enjoy this letter that was recently written that outlines how this impacted one employee benefit advisor in the marketplace.

HIPAA & HITECH Compliant? Many CPAs and Payroll Firms Are Not …

it is my strongest belief that ACA reporting is changing the employee benefit marketplace in a way that few could have predicted

There has also been quite a stir recently as some CPAs and payroll companies who decided to perform this reporting just became aware that they must be HIPAA and HITECH compliant. The reason most payroll companies and CPAs forget about this detail is that they normally work with employee specific information regarding payroll records.

For payroll record specific information, HIPAA privacy rules have an exception that allow for the data to not be considered Protected Health Information (PHI). When it comes to ACA Reporting however, there is no similar exception.
The information that is necessary to complete ACA reporting (list here) contains employee Social Security Numbers that are connected with medical plan enrollment details. For this reason, the data necessary to complete ACA Reporting must include PHI and thus the HIPAA and HITECH Compliance rules come into effect.

These rules require many various things, including the following:

  • Employers must enter into a Business Associate Agreement with any vendor they share PHI to in order to complete ACA reporting.
  • Once the vendor comes into contact with the PHI, they have responsibilities to encrypt and safeguard this information.
  • Any communication that includes PHI (emails, etc) must be sent encrypted in order to ensure compliance
  • Once the payroll company or CPA receives the data, they must maintain all other HIPAA and HITECH compliance items regarding how the data is accessed and stored.

What Does It All Mean?

Because of this frustration and confusion, employers have begun to do what they always do when they need help … they turned back to their employee benefit brokers.

The role of these advisors moving forward to assist employers will be enormous and there is a great unwinding of employers away from their payroll vendors and CPAs for ACA reporting. Employers will also enjoy a much higher level of service from the advisors they already have a working relationship with, not to mention the costs are typically much less expensive than what payroll vendors and CPAs charge.

Because of our front row seat, we hear from benefit brokers across the country every single day about accounts they are taking from other unprepared brokers because of ACA Reporting. It is our opinion that more business will change hands via broker of record letters in the next 2 years because of ACA reporting than over the past 7 years prior to the reporting. This is creating a huge opportunity for the prepared brokers. However, they are now facing steep learning curves and resource curves to ensure they meet their client’s needs.

How to Get Prepared …

The best advice you could ever receive is to take this opportunity to grow and write new business! Instead of trying to spend the time and money necessary to become ‘the’ expert in this reporting, simply follow the lead of the best brokers in the marketplace.

The top 1% of brokers are partnering with vendors to assist them in having full capabilities for ACA reporting. The regulations are very complex and changing, and by partnering they can always ensure they have adequate up to date resources to meet their client’s needs.

Also, and this should be obvious by now, but we would strongly recommend you try to find a solution that is not tied to any one payroll vendor. This makes a lot of sense, not only because of their fees and client’s experience with this year’s reporting, but never forget that most payroll vendors also sell employee benefits and thus are also your competitor.

Next for your client’s sake, use a company that provides customer support, not just regarding their product or offering, but on the overall ACA reporting requirement. Third, choose a company that determines the codes on lines 14 and 16 on behalf of your client. This will lower their stress levels as well as yours.

Use a service based company with a history of providing a great client experience. Lastly, consider a company with a history in employee benefits. Use someone who is familiar with the industry already rather than still attempting to “get up to speed”. ◊

– See more at: http://www.lifehealth.com/new-confusing-world-aca-reporting/#sthash.Tj3ENPP3.9WyqF1DO.dpuf

ACA Affordability Safe Harbors must work for Everyone in a Class …

The IRS regulations for ACA reporting require an employer to show that they offered the ‘right type of plan’ at the ‘right type of cost’ or else face penalties.  This means that an employer must have offered minimum essential coverage and minimum value coverage at a cost no greater than 9.5% of the employees household income.

Problem!  When you hired an employee you didn’t hire their whole household, so how are you to know what that number actually is?  To deal with this issue the IRS allows for employers to make assumptions on what the household income is for an employee.  It is important to note however, the Affordability Safe Harbor MUST work for everyone within a class of employees in order to use it.  Lets take an example …

Example:  The employer has a class of hourly employees that they are applying the rate of pay safe harbor for affordability purposes.  There are 100 employees in this class.  The safe harbor works for 99 of the employees but does NOT work for 1 person.  This safe harbor cannot be used for ANY employees in this class.  Instead, line 16 of their form 1095-C would simply be left blank and the IRS would use the final, actual household income of the employee to determine if a penalty could apply.

Of course for our clients, we perform all of this analysis on their behalf.  If by chance you used a different vendor for reporting and need assistance, we can assist you through our consulting services.  Find out more by clicking here …


To see specifically where this information and guidance comes from, you can visit this link here to see the Federal Register Vol.79, No.29.  On page 57 of this document you will find the following language:

(i) Conditions of using an affordability safe harbor. An applicable large employer member may use one or more of the affordability safe harbors described in this paragraph (e)(2) only if the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that provides minimum value with respect to the selfonly coverage offered to the employee.  Use of any of the safe harbors is optional for an applicable large employer member, and an applicable large employer member may choose to apply the safe harbors for any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category. Reasonable categories generally include specified job categories, nature of compensation (hourly or salary), geographic location, and similar bona fide business criteria.  An enumeration of employees by name or other specific criteria having substantially the same effect as an enumeration by name is not considered a reasonable category.

CPAs Performing ACA Reporting … Pay Attention to HIPAA Compliance


In working with CPAs across the county, we have found that the overwhelming majority have not been aware that in order to perform Affordable Care Act (ACA) reporting on forms 1095-B and 1095-B for their clients that they must be HIPAA Compliant.  The confusion is understandable, since this likely is the first time they have ever really dealt with Protected Health Information (PHI).  Employee benefit brokers typically work with PHI on a daily basis every day, and thus are familiar with the requirements, such as entering into a business associate agreement with your client.  However on the whole, we are finding out that CPAs are not aware.

This link here from HHS.gov will be helpful to anyone who is looking to further research this issue regarding how business associate agreements work.  In addition, you will see CPA firms listed as examples of business associates.


 

Well what about employment and payroll records?  The immediate defense of CPAs normally is that they already are working with this type of information and are not required to be HIPAA compliant.  However, it is important to understand that HIPAA Privacy rules exclude these type of records that CPAs often work with. When it comes to working with PHI for this Affordable Care Act reporting though, this is a different story.

This link is a blog article from the American Institute of CPAs that you might find helpful on this topic. (link here)


What is PHI?

In terms of ACA reporting, whoever performs this reporting will indeed become in possession of PHI when they receive medical plan participants enrollment dates, dis-enrollment dates and social security numbers.  Since the information that is being received is connected with a health plan, this information becomes PHI.  Anytime you come into contact with PHI, you must enter into a business associate agreement and take certain other steps to maintain HIPAA compliance.


 

What is required of CPAs to be HIPAA compliant?

We would strongly suggest you speak with an attorney (as we do not give legal advice).  When you speak with an attorney, you will likely find the following items below as necessary:

  • Entering into a business associate agreement with clients
  • HIPAA training of all staff
  • Internal HIPAA security measures to ensure compliance with HITECH Regulations
  • Ensuring the servers and other computers in which you hold PHI are encrypted, fire walled, have server logs and audits, etc.
  • Rules on how data breaches are handled and communicated
  • Normally it is recommended to have Cyber Security insurance policies in place
  • It is also a very good idea to ensure your E&O insurance will cover you for these activities

Again, don’t take our word for it … definitely speak with an attorney.  And if we can help you, please let us know.  We partner with CPAs across the country to assist them with delivering an ACA reporting solution to their clients.

 

 

 

 

ACA Reporting Extensions … What you need to know

Just like most things Affordable Care Act (ACA) related, there is a significant amount of confusion about how the ACA reporting extension works.  Hopefully this article will help …

The first thing you need to know is that there are actually TWO DIFFERENT extensions employers need to know about.

  • First, you can receive an extension by sending the required ACA reporting to the IRS
  • Secondly, there is a completely separate process to request an extension regarding providing the forms to your employees

1).  As an Applicable Large Employer (ALE), employers must file the appropriate forms 1094 and 1095 with the IRS.  Should you need additional time submitting the data to the IRS by the March 31st e-filing deadline, you can receive an automatic 30-day extension by completing Form 8809.  More information here…

2).  The form 8809 does not apply to providing forms to employees however.  To ‘possibly’ receive any extension in providing the appropriate forms 1095 to your employees, and employer must send a letter to the IRS requesting an extension  (full instructions on how at the bottom of this article).

Finally, many are relying upon the ‘Good Faith Effort’ provision that the IRS has issued in regard to their 2015 ACA form filings.  However, it is important to know that this provision does not apply to timely providing forms to recipients or the IRS.  For employers who do not provide timely notices to the IRS or recipients, they will face the penalties prescribed by the law.


Instructions on Extensions of time to furnish statement to recipients. You may request an extension of time to furnish the statements to recipients by sending a letter to Internal Revenue Service, Information Returns Branch, Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. The letter must include (a) filer name, (b) filer TIN, (c) filer address, (d) type of return, (e) a statement that extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the filer or authorized agent. Your request must be postmarked by the date on which the statements are due to the recipients. If your request for an extension is approved, generally you will be granted a maximum of 30 extra days to furnish the recipient statements. For purposes of requesting an extension of time to furnish the statements, the term filer means the ALE Member, or the Designated Government Entity, if applicable.

Designated Governmental Entity (DGE) Did Not Fully Report on ACA To IRS …

Many municipal and other governmental entity types have been surprised by the fact that their Designated Governmental Entity has not reported all of the necessary information to the IRS as they assumed would happen.  Under the Affordable Care Act (ACA), Applicable Large Employer (ALEs) must report to the IRS on the type of plans that were offered to their employees, the costs of these plans, and who was covered under the plan.  For some governmental groups (we will call these ‘primary’) they might have a separate governmental entity that has some of their employees covered and who have agreed to perform the ACA reporting on behalf of the ‘primary’ group.

Example:  A school district has all of their teachers covered under the State medical plan, but all other staff covered under a separate plan.  The State has told the school district that ‘we will perform the reporting for you’. This is normally very misleading to the school district because the State health plan normally only intends to report to the IRS who was covered under the medical plan, and NOT the offer of coverage.

For those of you familiar with ACA reporting, the State health plan in this instance normally will report medical plan enrollment but NOT report the other necessary Offer of Coverage that shows up in lines 14, 15 and 16 of form 1095-C.  The end result is that the school district has not reported fully to the IRS and are now subject to penalties.


So what can you do ….

#1.  If you have a Designated Governmental Entity that is performing some of your reporting, you need to ask them if they are reporting for the Enrollment on the plan, OR ALSO the offer of coverage.  Understand it is unlikely they will report the Offer of Coverage.

#2.  If the DGE is only reporting enrollment, they will complete that on form 1095-B.

#3.  The underlying school district in our example still must complete forms 1095-C on these teacher employees, sections 1 and 2.


Need assistance?  Reach out to our customer service department by clicking contact us at the top of the page.

Evaluating ACA 6056 Employer Reporting Software?

Evaluating ACA 6056 Employer Reporting Software?

Employers & Benefit Brokers Evaluating ACA 6056 Reporting Software

If you are a large employer or employee benefit broker, chances are you have spent a lot of time trying to determine the best ACA 6056 reporting and compliance solution for your clients.  At ACA Reporting Service, we do not sell software – but rather full service reporting.  However, we have researched almost a dozen different ACA employer reporting and compliance vendors and we thought we would pass along what we learned.

Beginning Questions To Ask Yourself

As an employer or benefit broker, this is how the ACA reporting question breaks down for you.

1).  Some employers will have their online enrollment (benefits administration) and payroll with the same vendor.  In those cases, as long as the client is willing to pay for it, it will likely make sense to just perform the required ACA reporting of IRS forms 1094 and 1095 with that vendor.

2).  Some employers will not have an outside benefits administration or payroll vendor.  They do everything in-house.  For these employers, there is going to be a lot of ACA work to be done and obviously you will need a stand alone solution.

3).  Finally, you have some employers who have payroll and benefits administration with different vendors.  This would include the scenario where one of these functions is performed in house.  In these cases you will either need to consolidate both payroll and benefit plan elections with one vendor, or you will need a stand alone solution.

Basic Conclusion:  If you are an employee benefit broker with various types of employer clients, we don’t see a scenario where you can get away with not having a stand alone ACA reporting solution to help your clients meet their ACA Reporting Requirements.


What do you need to know in evaluating ACA stand alone software vendors?  Things to keep in mind as an employee benefit broker if you want to do this on your own.

Employee Benefit Brokers, Ask Yourself These ACA Reporting and Compliance Questions

1).  Security?  What if all of the social security numbers of your client’s employees was stolen?  Can you imagine the fall out?  Many of the systems we reviewed were severely lacking in terms of security.  What level of encryption is being used for the data?

2).  Branded to your company?  Many different ACA reporting vendors offer the ability to brand a portal to your company that your employer clients will be able to login from.

3).  Is the system mainly a benefits administration system?  The differences in these systems can be extreme – from very low level to incredibly high level.  Will this add additional costs for the ACA reporting module?  Also with many benefits administration systems, there are additional charges for EDI (electronic data interface – where election data is sent to insurance carriers).  Will additional fees apply with this new ACA reporting?

4).  Is the ACA reporting solution even built yet?  Many of the ACA reporting module demo’s we sat in on were from vendors who do not even have the software built yet.

5).  How long will your data be stored?  The IRS has said that audits will begin starting in about 18 from months from the filing date, and that can last for 7 years total.  If you do not have a methodology to get back to your data at the time of inquiry, you are stuck.

6).  Is your vendor set up to file with the IRS?  Did they just lie to you and say yes to that question?  As of the writing of this blog, no one is set up to file with the IRS electronically (efile) for forms 1094 and 1095.  The IRS has literally just issued the guidelines to begin getting started with this.

7).  Variable hour tracking?  Do you need variable hour tracking to determine eligibility?  For many employers a simple spreadsheet will do the trick.  Many vendors have quite robust capabilities in this area, and for some employers this will definitely make sense.

8).   The ‘Gotcha Moment’.  This comes at the end of a great presentation where they tell you there is an additional $3 to $5 per employee to file the forms with the IRS.  Generally this will make the costs of this solution not competitive.

9).  ROBUST ACA LOGIC.  We cannot tell you how important this is!  If you have spent as much time looking at these forms as we have (especially in terms of form 1095c lines 14, 15 and 16) you will know that performing this reporting is MUCH MORE than just uploading a spreadsheet.  The codes for these lines are based upon logic.  Most systems do not have this logic built into their system, but rather it will be up to you as an employer or benefit broker to figure this out.  For most employee benefit agencies, you can count on this little ‘bug’ shutting down your operations in January.

What if you decide to just file them incorrectly?  When your largest client has 100 employees bring them letters from the IRS, you will then realized this was a very bad idea.

Also, without robust logic built into the system there will be no accommodation for situations such as someone terminating in November/December and then electing COBRA in January.  The codes for these situations are different.

10).  Are forms stored for future access and corrections?  Bottom line – there is going to be issues with the reporting from time to time.  Do you have the ability to go back into the system and create a new/corrected 1094 or 1095 form on behalf of the employee?  Many systems that rely solely on a census upload would require you to basically start over in order to make this one fix.  OR, your staff can just manually create one in .pdf which will take a lot of time.

11).  Do you have to pay for the whole system up front, or are there monthly options?  Do you need to commit to multiple years with the software vendor?  Do you have to pay onging for the solution or only once?  Are there implementation costs?  Are there separate fees for the IRS form file reporting and all other functions in the system?

12).  Can the employee elections be uploaded via census, or do you need to type it all in?

13).  Will they have adequate customer support between January 1st and January 31st so that you can KNOW you will be able to get this all done?

14).  Do you want to just let the payroll vendor do this for your client?  Do you really want to recommend your client that they should have another function performed by someone who wants nothing more than to take your business away from you?

. . . OK, that is enough!  We hope you find this helpful.  In the case that you would like someone to be fully hands on and provide great service to get all of this reporting done, we will be here to help!

 

 

All Large Employers MUST Complete ACA Reporting (Even Fully Insured Groups)

All Large Employers MUST Complete ACA Reporting (Even Fully Insured Groups)

This comes as a surprise to many, but YES – if you are an employer with 50+ employees (or full time equivalent employees), you must complete ACA Reporting to the IRS (forms 1094 and 1095).

But I’m Fully Insured . . . My insurance carrier will take care of this right?   No!

You might have thought that your insurance carrier was going to take care of this, but they only report the portion that they are required to report as an insurance carrier.  Employers still have additional responsibilities.  


The easiest way to think about this is by considering what the Affordable Care Act accomplished:

  • Individual Mandate – all US citizens must now have health insurance or pay a penalty
  • Employer Mandate – all large employers (50+ employees) must offer coverage and that coverage must be affordable
  • The IRS is in charge of making sure these things happen.

So how does the IRS make sure that an individual did have health insurance and doesn’t owe an individual tax penalty?

This is accomplished through the IRS receiving specific forms from the various places that an individual could have coverage:

  • The exchanges send the IRS the ‘A’ Forms (1095A)
  • The insurance carriers send the ‘B’ Forms (1095B)
  • And self insured employers must report everyone covered under their plan for the year using the ‘C’ Forms (part 3 of 1095C)

How does the IRS make sure each large employer (a) offered coverage and (b) that the coverage was affordable?

This is accomplished through the IRS receiving a completed form 1095 by ALL LARGE EMPLOYERS.  Specifically, part 2 of form 1095C is used to accomplish this task.

So as you can see this is not something that will be fulfilled by insurance carriers, and the penalties for not filing are substantial.  (IRS Fines)

Have questions?  Contact us from the support tab.  Thanks!

 

Employee Benefit Brokers, ACA Reporting. Huge Prospecting Opportunity, OR Administrative Pitfall?


The Million Dollar Question most employee benefit brokers are considering currently is should our firm try to perform this ACA reporting via an in-house technology solution that we purchase, or recommend having our clients use an outside vendor (such as us here at ACAReportingService.com)? The reality is that every operation is different, has different needs and have promised their clients different things.  Some brokers take a full service approach and look to take administrative burdens off of their clients.  Other brokers take a more consultative approach.  Neither avenue is ‘wrong’, but each works for different types of benefit broker operations.

Regardless of which option you choose, here are some things you should be thinking of as you consider the question:

  • Do we have the necessary resources internally to do a good job with this IRS form filing function?
  • Do we have the knowledge internally to complete the job well?
  • What approach will be most comfortable to our clients?
  • What are the security ramifications of the solution we choose?  (Knowing that having employee social security numbers compromised could be a disaster for your company.)
  • If you decide upon an outsourced solution, will you want to refer your clients to someone who also competes with your company as a benefit broker?
  • Do we need a solution to talk with employers about right now?  What is gained or lost by waiting longer into the year before bringing a good solution to the table?
  • How much time, money and staff will it take to deploy our solution?
  • Would our time be better spent prospecting for new clients during this time as opposed to trying to manage the process internally?
  • Which option is more profitable to our business?
  • What is the logic of the system we intend to use?  Are the codes and amounts for 1095c lines 14, 15 and 16 automatically generated?  Will our staff or clients be responsible for completing these fields without the assistance of smart technology to intuitively figure out what the codes should be?
  • How will customer service be handled for this whole process?

Often the reality for an employee benefit broker is that a mixture of different solutions makes best sense for their operation.  When it comes to full service ACA 6056 reporting and efiling, we are here to help.  

If you are interested to learn more about things you should be thinking of as a broker, click here for a prior blog post which has proven to be quite helpful.

 

10 Quick Reasons To Partner With ACA Reporting Service

 

Often when speaking with Payroll Companies we get the question, “Why would we not just build our own internal ACA reporting capabilities for our clients?”.  Here are a few quick reasons:

    1. Your major competitors (ADP, Paychex, etc) already have a system and they are trying to poach your clients by showing that they already have a solution.
    2. Your clients really want a solution – NOW.
    3. Developing ACA Reporting capabilities takes a lot of time and money.
    4. Instead of spending your resources building additional technology, you could have all of the technology and still get all of the profits you expected to get.
    5. By partnering with ACA Reporting Service, you likely will be more profitable than if you developed the technology on your own.
    6. ACA Reporting Service offers a FULLY WHITE LABELED SOLUTION for your payroll company.  Your clients will see us as You!
    7. We are ACA experts already.  Do you really want to learn all that is required to be an expert?
    8. By partnering with us, your clients will also have access to a full employee benefit enrollment system if they desire.
    9. We have built a proprietary process based upon our discussion with the IRS and in-depth knowledge of forms 1094 and 1095.
    10. ACA Reporting Service will deliver to your clients an incredible customer service experience.

Form 1095-C Printing & Mailing Service Released

If you have not heard the news yet, we have recently opened up our form 1095-B and form 1095-C mailing services to employers.  The feedback we have received thus far is that we are one of the least expensive option in the marketplace, especially when considering the total value we bring to the process.

You can learn more by visiting this page on our website here…

In addition, we have released a form 1095-C code calculator to assist employers with knowing more of the logic regarding how lines 14, 15 and 16 work.  This is being provided courtesy of TaxForm1095.com.  You can see this calculator on our website from here.