The Affordable Care Act (ACA) has been with us for a few years now, but in 2016 some of its more complex requirements for employers will take effect. Specifically, new reporting for employers to document the level of coverage provided to their workforces will be due in the first half of the year. As a result, employers are working to determine whether to outsource this effort, handle it internally, or some mix of both. As both HR outsourcing providers and HCM software and service providers scramble to provide solutions for their customers, we’re currently in the middle of a very demanding period for benefits departments everywhere in the U.S.
One of the solution providers doing an amazing job of supporting companies through this round of new compliance requirements is Workday. Workday has been providing comprehensive guidance and solutions to users of its Benefits Administration capability since last year, and Appirio’s own Workday customer base has been heavily engaged in getting ready to produce this year’s first batch of ACA compliance reporting. A couple of Appirio’s experts on ACA compliance in Workday Benefits came together to discuss the changes, challenges, and more.
Kristen Hamilton joined Appirio’s Workday Benefits consulting practice in 2015, bringing many years of Workday experience in the software industry to the team. She helps support her clients with new implementations, enhancements to existing deployments, and ongoing support and knowledge transfer.
As a Senior Consultant on Appirio’s Workday Benefits team, Diane Waterman partners with clients at all levels of the client’s benefit organization to ensure the internal teams can process day-to-day requests, as well as meet corporate and government reporting requirements.
What is so different about the requirements coming in this year from the IRS to enforce ACA compliance? Why is this such a big deal for employers?
KH: The biggest change that will impact large employers is the increased Employer Mandate. In 2015, businesses were required to offer healthcare coverage to at least 75 percent of their employees. Effective January 1st, 2016, that number jumped to 95 percent. So employers really need to be sure that they have updated their plan eligibility to cast a wider net. If they do not, it could result in penalties.
Another change that took effect as of January 1st of this year is that mid-sized employers (50 to 99 employees) are no longer exempt from penalties. These organizations will also now be required to offer coverage to 95 percent of qualifying employees. This means that more businesses will need to meet the ACA requirements.
DW: In previous years, the focus has been on ensuring employers are offering coverage to employees who do not typically work enough hours to be offered benefits but may have averaged enough hours to warrant a company benefit offering. This year the reporting provided to the IRS will be used in part to determine whether employers are providing offers of health coverage and to determine the employer shared responsibility payments. Without the employer reporting, the IRS will not be able to determine if employees are entitled to premium tax credits.
What are the penalties for organizations that aren’t able to comply? Can they delay this or will they be fined?
DW: IRS.gov is a website offering information on everything an employer needs to know about ACA reporting, and should always be used as the source of truth. But in general, if an employer does not file electronically (if they are required to do so), a fine could be invoked for both an original filing and a corrected filing. Employers can apply for a waiver if they can establish reasonable cause. The IRS is looking for good faith effort to comply, but penalties can be invoked up to $250 per failed return — with an annual cap of up to $3 million.
KH: Organizations can face penalties for a number of reasons related to noncompliance: not offering healthcare to 95 percent of its employees, not offering plans that were affordable or that meet the minimum value (per the IRS guidelines), and/or not filing in a timely manner with the IRS. As Diane said, the IRS.gov website provides complete information on penalties and fines.
So what is the solution for most companies? Can they simply outsource this and not worry about it?
KH: It really depends on what tools the organization has at its disposal. Even if a business decides to outsource the ACA reporting, a good deal of work still has to be done in order to provide the required data. This becomes a little easier if they have an existing relationship with the company that will compile the reporting, as there already may be integrations in place. But there are always hiccups with these kinds of arrangements. Companies using a robust human capital management application like Workday will have a much easier time completing both the 1094-C and 1095-C forms; because a majority (if not all) of the data they need should be readily available in the system.
DW: Every company needs to make their own decision about their ability/capability to report appropriately. Companies can outsource this (there are a number of companies handling ACA reporting), but for companies using Workday, the functionality to effectively administer the ACA guidelines — including the ability to generate and transmit the required tax forms — is already included at no additional cost. The added advantage is that all the data needed for generating the forms is in Workday.
So how else is Workday helping customers get through this?
KH: Workday has proven to be a valuable partner to HR organizations trying to tackle the ACA reporting. Not only have they kept the functionality up to date as the interpretations of the law have shifted, but they have also delivered additional functionality to ease the burden on organizations in order to make reporting simpler. Additionally, Workday has done an excellent job of keeping users up to date on the myriad changes to the regulations through their Community portal. This same portal has allowed Workday users across all industries and regions to collaborate and help one another find the best solutions for their organization.
DW: They’ve also delivered additional functionality that allows an employer to upload data for employees that may not have been captured in the original loads (terminated employees on COBRA and retirees), and to correct for any historical enrollment issues.
So what are the next big deadlines customers should be focused on right now?
DW: There are 2 impending deadlines. The first being March 31st, when 1095-C forms are due to employees, and June 30th, when employers are required to electronically provide both 1094-C and 1095-C data to the IRS.
KH: Yes, those are the big 2. The original deadline for the 1095-C was January 31st, but it was extended for 2016. We will likely see that deadline moved back up for 2017.
How can Appirio help companies work through their ACA compliance needs?
KH: Appirio can help companies of any size at any stage in the reporting process. We can collaborate with them on a number of fronts: from implementing the full configuration to identifying and uploading gaps in their data. We can also help in an ongoing support capacity for companies that have already completed their configuration but may be running into issues after generating the forms. We understand that the ACA places additional demands on our clients’ organizations, and we are happy to provide guidance and support in any way we can.
DW: Our Benefits team and Cloud Management Services team can help clients navigate the configuration components necessary to generate the applicable forms. All configuration is collaborative, but with the ACA Reporting Requirements, there are a number of players that need to be involved — from benefits teams to legal departments, to those that configure the systems. Working together with an experienced implementation team will help to ease the pain of this complex reporting.