By now, some of your clients have come to you with a problem: How do I address this tax filing for IRS 6055/56? For some reason, their payroll vendor is unable to deliver or wants an arm and a leg to do the filing. You hold out hope that somehow this will blow over and get resolved. But as we get into the summer months, a greater number of your clients lacking in options will be knocking on your door for a solution. You should think of offering one. Here’s why:
1) Your competitors will. More and more brokers and administrators are coming to the realization that the payroll/HR market will not address their clients’ filing needs and, as a result are looking for options. If the client doesn’t need active measurement of variable hour employees the problem is easily solvable.
2) Either way, you are involved in the process. Regardless of which solution delivers the reporting, your employer will need advice on affordability, selection of safe harbor, transition relief, offer of coverage, lowest cost plan and the collection of employee and dependent elections. If you need to furnish this, you might as well own the process.
3) You can charge for it. Providing 6055/56 reporting as a service can be a money maker for an agency, even though staff time will be required.
4) It’s sticky. Brokers who manage the setup and delivery of a client’s Affordable Care Act reporting will help save their client from the downsides of not filing on time, and the set-up can be repurposed in the following tax year.
5) It can attract new clients. The number of applicable large employers looking to create 1094 and 1095 C forms is staggering. These clients are in a desperate situation to deliver the reporting. If you can solve this problem for them you will certainly get their attention.
During the late ’90s, when employee self-service was making its break into the HR market, many of us were mesmerized with the new vendors that entered the market demonstrating Web-based benefit enrollment solutions.
At that time, the concept of no longer having to use forms, applying eligibility rules automatically, collecting elections and delivering enrollment data to carriers and payroll systems seemed like a game-changer in our business. That was more than 15 years ago, and yet today many employers are still using paper to enroll their employees.
This seemed counterintuitive for several reasons, including the cost efficiency of self-service technology over manual work, reduced errors in data and insurance calculations, and overall faster processing of benefits. Why hasn’t client adoption met expectations with mid-sized employers during the last two decades? The answer usually falls into areas such as lack of budget or a company culture or environment is not suitable for this type of automation.
Recently, a number of trends are pointing companies in the direction of benefits administration. Overall adoption is growing at a much faster pace than we have seen in a long time. This can be attributed to the following five factors, which are worth noticing:
1) ACA compliance — In order to comply with The Affordable Care Act, employers need to have a cost-effective method of tracking monthly eligibility, elections and waivers of coverage which electronically enrolled benefits provide. Once tax filing is due in the first quarter of the following year the benefit administration system will complete the 1094-C and 1095-C forms and assist with the electronic filing. Also, benefit administration systems may support variable hour measurements for ACA compliance. If client doesn’t have a practical way to deliver the 6055/56 requirements this solution will help
2) Complete human capital management — In the past, small- and middle-market companies purchased payroll systems without much consideration for other areas of HR automation. Over the last 10-plus years, several affordable human capital management solutions have entered the market and have grown significantly in popularity. These solutions are delivered as software as a service model, meaning they are licensed through subscription and accessed over the Internet. SaaS human capital management offers a full suite of functionality, from recruiting to payroll, and generally provides a benefits module with Web-based enrollment and benefits administration.
3) The new generation of workers — Millennials (employees born between 1980 and 2000) hate working with paper. Companies still living in a paper world risk turning off younger workers that are accustomed to receiving information in a digital format. For this reason, forward-thinking companies are looking to invest in solutions that offer employee self-service through HR technology.
4) Mobile — According to comScore, a global leader in digital measurement, 173 million people in the U.S. own a smartphone. Also, at least half of U.S. households have at least one tablet computer, according to Gartner Consulting. HR technology companies are looking to expand accessibility of their application by enhancing their mobile experience. While functionality is more limited on the smaller screen of an iPhone, tablets are another story. And, mobile has enabled companies to transcend the argument, “My employees do not have a computer,” by providing access to a larger audience of workers.
5) Private exchanges — We will continue to see growth in the private exchange market as employers are looking to expand choice and control costs. The engine underneath a private exchange is often a benefits administration platform providing online enrollment and carrier connections. Several private exchange solutions have become available in the small employer market, expanding the footprint of paperless enrollment.
When I examine a business problem I often find myself coming back to the classic fairy tale, Goldilocks and the Three Bears. One area that aligns with Goldilocks’ concept of finding what is “just right” for her needs is the quest to find the right approach for filing and reporting under IRS 6055 and 6056, as required by the Affordable Care Act.
Having the ability to track and manage the required data should be happening now. It includes completion of 1094 and 1095-C forms, distribution of these forms to employees by January 2016, filing of these forms to the IRS by February 2016 and the downstream electronic filing by March 2016.
These requirements have put benefit advisers and their clients at a crossroads and have created a small a panic in selecting the “just right” solution. How can an employer solve this problem in an affordable and practical way that doesn’t drain resources and take up too much of its time? Can existing payroll systems, HRIS or TPAs help meet the requirements of 6055/6056? Are other third-party solutions the better way to go? Or, for the truly confused, does one need to file at all?
In response to the confusion, we have seen dozens of ACA reporting solutions enter the market over the last 12-24 months. Some are connected to existing HR, payroll or benefit systems; some are free-standing. Several of these new solutions offer impressive reporting and mind-bending dashboards, translation of work hours and visibility into workforce metrics that allow employers accountability along the way. A handful of solutions also provide legal guidance and file directly to the IRS on behalf of the employer. In working with employers to find the “just right,” solution it is important to ask the following three questions:
1) Do you have a large variable hour population?
2) Can your current technology do it all?
3) Can you simply get by with piecing together of data and reporting?
No. 1: When to consider a variable hour solution: One of the first important steps in determining ACA reporting resources is to assess if you have a manageable variable hour situation. Employers with significant variable hour populations such as staffing firms, retail and educational institutions will continue to be regularly challenged in compiling 6055/56 reporting unless their system has built the infrastructure to handle those complexities.
As hours fluctuate over 30 hours per week, employers need to be actively administering measurement periods and making an offer of coverage on a timely basis. Current payroll and HR systems, while they can manage hours, may not be able to address the difficult ACA rules associated with these populations. And some of the intricacies with respect to hours can stretch the limits of a benefits administration solution. Educational organizations, for example have specific rules regarding unpaid academic breaks. Furthermore, employers that frequently hire and rehire complicate the measurement process.
For this reason, you may be better served by going to a solution built specifically to manage ACA variable hour populations. Vendors in this space include HealthFX, Tango, Equifax, UnifyHR and Worxtime. If a third-party solution is selected, it is important to make sure adequate support is provided in the design and implementation as well as the ongoing exchange of work hours. It is also important that the employer has a method of tracking offer of coverage (benefit administration solutions do this) so the specific month of that offer can be accounted for in the reporting.
No. 2: When to look to existing technology or another solution: If variable hour measurements can be managed using a current system or the employer doesn’t have a variable hour issue, you should consider your current technology. Employers may have a payroll or HR solution, a benefits administration platform, or another application that can fulfill their needs around 6055 and 6056 reporting.
At first glance, it is hard to tell if these systems adequately meet the requirements. Does the system have a method of tracking offer of coverage? Can the system generate 1094 and 1095 C reporting under current guidelines? Is there an upgrade cost involved?
In some instances there are gaps in capabilities or budgets. For example, an in-house payroll system utilizes software that normally pre-dates ACA tax reporting. Upgrades to the system may exist, but do not likely address the detailed needs of 6055 and 6056. Or, a Cloud-based payroll or HR may be used, but the employer is challenged to track offer of coverage or elections into plans. Upgrades to address these needs may be unrealistic.
It is important to note that some benefit administration vendors such as Bswift, Businessolver, Workterra and Empyrean have some good options within their offering. If a client is looking to address the enrollment of their benefits in 2015, you might be able to kill two birds with one stone.
No. 3: When assembling the data might work: In the HR world, the exchange of data is often an ongoing issue. We see this when benefits administration carriers feed elections to payroll or HR systems, the sending of data from payroll to accounting or the payment of taxes. In the case of 6055 and 6056, if you have a nonexistent variable hour population, then ACA reporting can be a singular event where the data is simply compiled at year end using various resources. The key to this method is the reliability of the data relative to the 6055/56 requirements.
At the same time, an understanding of how this data makes it way to the reporting is equally important.
For anyone who has studied the requirements for form 1095-C, it becomes apparent that the completion of these forms is more than simply mapping data out of an HR system. In addition to demographic information, a great deal of ACA compliance data is crammed into a few small sections of the form in lines 14, 15 and 16 and section III. In these sections you will find disclosures for transition relief, offer of MEC, safe harbors, affordability and dependent information if you are self-funded.
So where does this data exist? It’s often a combination of Excel spreadsheets, payroll reports and carrier eligibility details along with a lot of interpretation. Knowing where the sources of required data come from and how to consolidate it to comply with 6055/56 is feasible, but requires expertise in this arena. Some solutions such as HealthCostManager, a soon-to-be-released solution, will assist with the completion of the forms, as well as provide electronic filing and other important reporting to get the job done.
Regardless of your approach to addressing ACA reporting, timing will be a factor. The more complex your situation, the greater the lead time you will need. It is not uncommon to remain uncertain of your direction even as late as the spring of 2015, but still be able to meet all of the deadlines in 2016. It is important to note that most of the vendors that specialize in variable hour compliance and measurement take retrospective data and pull reports from various sources to get you up and running in time for filing.
At the same time, the implementation window for these solutions will start closing as we approach late summer/early fall of 2015. If you have some degree of complexity and no solution in place, you should start putting a plan together as soon as possible. Because each client has unique systems, employee populations, hours, turnover, plans and contributions, each situation likely needs to be addressed uniquely. Then you will know which approach is “just right” for your needs.
Weiskirch is principal, EmployeeTech, Inc. Reach him at firstname.lastname@example.org.
As we are approaching 2015 we are entering into a new era in employer sponsored healthcare where accountability of health coverage is the new normal. When I say accountability I mean When, Who and What. When is when you elected coverage into your health plan, and for what period of time in 2015 (e.g. January- December 2015). Who, as in who is your coverage with. What is the question of what does your coverage consist of; does it meet minimum essential coverage and is the corresponding lowest cost single plan (maybe your plan) affordable based on 9.5% of your and w2 earnings. 2015 is all about these metrics as we prepare for 2016 which will be all about the reporting, but also about accountability as well. These measurements tie back to the ultimate enforcement of The Employer Mandate and the Individual Mandate through IRS sections 6055 and 6056. Penalties associated with not complying with The Employer Mandate are of particular concern.
Recent releases of IRS transmittals forms 1094 and 1095 (B & C) provide insight into the type and frequency of data that will need to be reported in 2016. It is useful today as we plan for next year in terms of making sure this data is properly collected. Nevertheless, there is a great deal of focus and perhaps panic around the filing aspect which is 15 months away. The terms of electronic filing (clearly the most efficient way to get data to the IRS) are still being defined by the vendors (HR/payroll, Benefits Administration systems, and ACA compliance solutions) and the IRS. Both are now in the midst of figuring out how to assist or deliver in the filing for 2016. This is not where the focus should be now for employers. Instead, all of the efforts should be to ensure you are collecting the data properly in 2015.
If you have a benefits administration system that collects and maintains elections in place for 2015 you are most of the way towards meeting the requirements. This, assuming you are measuring the when, who and what described earlier. The missing pieces which can be captured in a system are the waivers and the employees that simply forgot or didn’t get around to it for some reason- the “non-elected bunch”. For waivers it is suggested that you deliver an affidavit where the employee agrees they have been extended coverage and by declining is aware of the risks of not having coverage and penalties of the individual mandate. The affidavit can also apply to dependents as well. For the non-elected employees, it’s a matter of tracking them down and making sure they ultimately complete their elections before the deadline of open enrollment or the new hire election period. All of this defines what has been referred to as “the offer” of health insurance which by 2016 will go up to 95% of all eligible employees if you are an Applicable Large Employer (ALE) (50+FTE’s).
With these additional measures in place for 2015 you will be in a good position to reach compliance and extend an offer. For my customers and their clients that are ALEs, we are in the process of making sure their benefits administration system is collecting the when, who and what information in a proper fashion. I would also consult your legal/compliance support to make sure you are delivering the correct language at time of enrollment. With all of that you can rest easy…..sort of.
In the May 2013 issue of Employee Benefit Adviser EmployeeTech’s Principal, Michael Weiskirch writes about how technology addresses the biggest challenges of health reform. Click here to download
Deerfield, IL, [3/24/2014] since the passing of the Affordable Care Act, a company’s sponsorship of health plans has become an increasingly daunting task. Not only do they need to offer competitive health plans, but often the employer has to be mindful of their plans affordability, new taxes and penalties and the possibility that some employees are better off going to the Exchange. After over a year of research and field testing EmployeeTech will be finally releasing HealthCostManager, a Web-based solution that helps brokers and their clients determine an optimal sponsorship in a post-ACA environment.
HealthCostManager incorporates over 20 variables in its analysis of a health plan offering. These include how employee’s residential address will determine Medicaid eligibility and exchange plan rates, household income’s impact on subsidy eligibility for employees and how employer affordability will be affected by wellness incentives. It will also look at how shared responsibility penalties trade off with reduction of premium if an employee goes to the Exchange. All of these factors work together and require the right employer sponsorship strategy that lowers costs to the employer while providing the best options for employer and employee alike.
Understanding that ease of use is critical; HCM reports generate in a matter of minutes and can be saved for future client analysis. Each report delivers over a dozen unique exhibits including five different pay vs. play calculations, health plan taxes (current and future) , employee-level affordability, Exchange plan options and subsidy eligibility. HCM also provides an aggregate market analysis of Exchange plans in each employee’s location. EmployeeTech plans to release HCM in April of 2014 with regular updates and enhancements throughout the year.