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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.
Employee Benefit Adviser