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

What are the ACA Reporting Penalties?

When an Applicable Large Employer (ALE) fails to comply with their ACA reporting requirement, they will then be subject to various penalties.  These penalties apply both for not providing forms timely to employees as well as not filing timely to the IRS.

The penalties are as follows:

  • Did you fail to file a return, and on-time?  The penalty will be $250 for each return up to a maximum of $3,000,000.
  • Did you fail to provide your employees with their statements, and on-time?  The penalty will be $250 for each return up to a maximum of $3,000,000.

If there ever is intentional disregard of the requirement to provide employee statements, the total penalties stand to be increased from the base fines listed above.
The waiver of penalty and special rules under section 6724 and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under section 6721 or 6722.

Payroll Vendor Doing ACA Reporting … MUST be HIPAA Compliant


For payroll companies performing ACA reporting, we are increasingly finding that they forgot one very important detail … HIPAA and HITECH Compliance.

The reason most payroll companies 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 (payroll company in this case) 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 receives the data, they must maintain all other HIPAA and HITECH compliance items regarding how the data is accessed and stored.

….So one quick question you can ask yourself is, “Did I sign a Business Associate Agreement with the payroll company I hired to do my Affordable Care Act Reporting?”.  If the answer to that is No, then you might have a problem.


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


If you are curious how we handle HIPAA Compliance for our clients, you can learn more here.

 

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!