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ADP Totalsource - Affordable Care Act Reporting and Compliance
- 2. 2 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. Top 3 Concerns of Midsized Business Owners 1 2014 Midsized Business Owners Study 1
- 3. 3 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. Increasing Burden of ACA Laws and Regulations
- 4. 4 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. ACA – Broad Human Capital Management Impact • Cost of complying/data modeling • Fees/fines/penalty assessments & reconciliation • Certify Annual Health Care Coverage Report 1095-B/C • Communication • Employee calls/shared service center • Reporting • Compliance communication • New plans/wellness/rewards • Calculating look back period (keep data in sync) • Affordability calculation • Prepare and distribute new annual report (6055/6056) • Collecting hours of service • Integration • Security • System updates/change management • Data recordkeeping • Reporting • Receive and reconcile IRS penalty estimates and appeal where appropriate • Auditing • Stay current on complex regulations • Interpret law – Federal & State Exchange changes • Ensure legal compliance • Verification of inquiries from Exchanges • Receipt of notices from Exchanges • Management of reporting deadlines/ period management • Administrative challenges • Staff to meet demands
- 5. 5 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. Shared Responsibility Decisions and Potential Penalties Did the employer have, on average, 100 in 2015 (50 in 2016) ACA full-time employees plus full-time equivalent employees in the prior year? Does the employer offer minimum essential coverage (MEC) to at least 70% in 2015 (95% in 2016) of its ACA full-time employees? Does the plan provide coverage of at least 60% minimum value? For lowest cost self only coverage, would any full- time employees pay more than 9.5% of current Box 1 W-2 Wages, Rate of pay, or Federal Poverty Level The penalty (assessed monthly) for not offering coverage is the number of full-time employees (minus 80 in 2015; 30 in 2016) times $2,000 annually. The penalty (assessed monthly) for failure to offer minimum value and/or affordable coverage is a $3,000 annual penalty that will be due for each full-time employee receiving a subsidy, up to a maximum of the total number of full- time employees (minus 80 in 2015; 30 in 2016) times $2,000. Penalties do not apply to small employers. Those employees may be eligible to receive a premium tax credit to buy coverage in the health insurance Marketplace. Did at least one employee receive a premium tax credit or cost-sharing subsidy in a Marketplace/Exchan ge? No penalty payment required.
- 6. 6 Your ACA Blueprint: Form 1095-C and 1094-C Who are your company’s full-time employees? For variable hour, seasonal and part-time employees, employers may utilize Measurement Periods to determine full-time status New employees Employees “reasonably expected” to be credited with 30 hours or more per week, or 130 hours or more per month, need to be offered coverage within the first 3 months of employment (no Initial Measurement Period) New employees Employees not “reasonably expected” to work 30 hours or more per week, or 130 hours or more per month, can be included in Initial Measurement Periods (IMP) to determine full-time or part-time status Ongoing employees Employees may be included in Standard Measurement Periods (SMP) to determine full-time or part- time status STOP 2 STEP Continue to next step Continue to next step © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. What is your company’s applicable large employer status for 2015? Determine the number of full-time employees – including full-time equivalents (FTE’s) based on at least 6 consecutive months of 2014 payroll data. Less than 50 FTE’s Not subject to Employer Shared Responsibility requirements, including reporting STOP 1 STEP Continue to next step 100 or more FTE’s Minimum Essential Coverage (MEC) must be offered to full-time employees during 2015 to avoid penalty. Forms 1094-C and 1095-C are required 50 to 99 FTE’s No penalties for non-compliance with Employer Shared Responsibility during 2015, but Forms 1094-C and 1095-C are still required
- 7. 7 Your ACA Blueprint: Form 1095-C and 1094-C 5 STEP Is your company part of an aggregated ALE group? The IRS instructions for Forms 1094-C and 1095-C define an aggregated ALE group as “…a group of ALE members treated as a single employer under section 414(b), 414(c), 414(m) or 414(o) of the Internal Revenue Code.” 4 STEP Is your company fully-insured or self-insured? Continue to next step Fully Insured • Only parts I and II of Form 1095-C are completed for full-time employees • Insurance carrier will issue Form 1095-B to each covered employee and include information on any covered spouse or dependents. Self-Insured • Identify spouses and dependents of full-time employees who are offered coverage • Identify any non-full-time employees who are enrolled in health coverage offered by your company (for example, former employees enrolled in coverage through COBRA) • Parts I, II and III of Form 1095-C must be completed for all full-time employees 3 STEP What is the lowest-cost, self-only, minimum value coverage offered to each of your company’s full-time employees? Continue to next step • Set up benefit plans and plan classes for employee self-only coverage options • After appropriate verification, certify that benefit plans and plan classes provide minimum value coverage • Determine all benefit plans and plan classes in which the employee is eligible to enroll • Verify the cost to the employee of each coverage option © Copyright 2015 ADP, LLC. Proprietary and Confidential Information.
- 8. 8 TotalSource Offers Simplified, Holistic ACA Compliance • Cost-effective access to high-end robust coverage offerings through the ADP TotalSource Health and Welfare Plan – Attract top talent – Reduce employee turnover – Effectively manage costs • ADP TotalSource maintains fiduciary responsibility for the Plan and provides full plan administration • Full support in complying with ACA © Copyright 2015 ADP, LLC. Proprietary and Confidential Information.8
- 9. 9 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. TotalSource Services and Resources • HR Business Partner consultation on ACA compliance • Access to the TotalSource Consultation Tool leveraged by HRBP • Access to real-time ACA dashboards detailing Affordability and FTE status • Core ACA responsibility (all clients, regardless of size) • Employer Shared Responsibility Provision (Applicable Large Employer, 50 or more full-time employees, including full-time equivalents) • Assist with insurance marketplace notice to employer in evaluating employee eligibility for subsidized marketplace coverage • Nondiscrimination consultation, guidance and testing on fully insured health plans* • Administration and evaluation of Excise Tax on high-cost coverage* • Auto enrollment administration for employers with 200 or more full-time employees* • ADP will complete and submit your annual 1094-C & 1095-C on your behalf *Regulations pending.
- 10. 10 ACA Annual Reporting The Trade Preferences Extension Act • Signed into law June 29 • Increased penalties all information returns, including Forms W-2 and 1099, and the ACA reporting Forms 1094 and 1095 • Mandated for employers that are considered applicable large employers • 50+ FTE • Penalties for failure to file have been increased to $250 per form to a cap of $3,000,000 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information.10
- 11. 11 Simplifying ACA Compliance © Copyright 2015 ADP, LLC. Proprietary and Confidential Information.11 It doesn’t take a crystal ball, it takes ADP. COMPLIANCE COST CONTROL EXPERTISE Insights StrategiesTools
- 12. 12 © Copyright 2015 ADP, LLC. Proprietary and Confidential Information. ACA Annual Reporting Made Easy with…
Editor's Notes
- SAY: As you can see, ACA and Employee Health Care is a top concern of most business owners just like you…
- SAY: When the ACA legislation was passed in 2010, there were less than 1000 pages. By 2013 it had swollen to almost 11,000 (10,535 to be exact) pages. If ACA regulations continue to change at this pace, it can be assumed that by 2018, when the excise tax kicks in, it could easily be upwards of 100,000 pages. This is not a one-and-done for 2015. This is going to be an ongoing challenge as the regulations change . . . And we know they will. 906 Pages Healthcare.gov Mar 2010 https://www.healthcare.gov/where-can-i-read-the-affordable-care-act “Nearly 11,00 pages” USA Today Oct 2013 http://www.usatoday.com/story/opinion/2013/10/23/affordable-care-act-pages-long/3174499/ Or 10,535 Pages CNS News October, 2013 http://www.cnsnews.com/news/article/penny-starr/11588500-words-obamacare-regs-30x-long-law
- As a result of being so broad in its scope, the ACA impacts multiple functional departments within the organization. It’s no longer just the HR or the benefits function that has to be involved. For starters, the ACA will clearly impact your finance and your tax departments as the ACA penalties are essentially managed as taxes. They are mostly non-deductible. And for large employers, several thousand lives and up, these annualized fines for shared responsibility and then later on for the Excise Tax can easily go into the hundreds of thousands or even millions of dollars a year if an employer doesn’t carefully comply with the requirements. In addition, your legal resources will be involved as it is estimated that there are more than 20,000 pages of regulations that have been issued to date since 2010 and its expected that by 2018 this could exceed over 100,000 pages of regulations-- and it doesn’t stop in 2018. Regulations will continue to be updated, changed, and issued for the next 20 or 30 years. A really good example of this is Section 125. Section 125 was passed in 1984. If you actually go to the code and look at the actual legislative language it’s less than two pages long, yet we have had over 1,000 pages of regulations issued since 1984, the most recent being this year 2014. And that same pattern will occur with ACA. Your IT systems will have to integrate data from multiple disparate systems and it’s important to keep in mind that it will be at least three and potentially five systems that will have to provide data depending on how an organization decides to respond and comply with the ACA. The data that these systems will have to provide must be stored and archived for at least seven years. This data is considered part of the employee’s permanent tax file. It’s subject to audit and it’s going to be critical in terms of responding to any penalty assessments that the federal government potentially imposes, allowing the employer to reconcile and appeal and avoid some of those penalty assessments if the government happens to have a mistake. Now what systems will be involved? The HR system is going to be potentially one of the systems that’ll be involved. In many cases, employers are setting up for example two different designations for full- time employees. There’s ACA full-time, which applies solely to the ACA requirements related to health care plans and then there’s a full-time designation for everything else. Things like vacation accrual or potentially stock participation or any of the policies or programs and the designation for regular full-time could be 37 ½ hours or 40 hours a week, whatever a client may have used historically. The payroll and time and absence management systems will all be involved. The payroll is going to be critical in terms of capturing the bulk of hours of service as well as things like month, average monthly salary or Box 1, W-2 values. Time is going to be involved to the extent that if employers have large part-time populations it is going to be critical to be able to manage those people to a true part-time status and as a result, avoid potential problems with other areas of the regulatory environment. Of most concern would probably be ERISA Section 510 which prohibits an employer from cutting back an employees’ hours resulting in that employee becoming ineligible for qualified benefits, to which they would otherwise be entitled. Your absence management system is going to be critical. We are measuring different things when we talk about hours of service. We are measuring hours that are worked and are paid; we are also measuring hours that are not worked but which are paid- things like paid vacation or paid leave. Now all of that should come from the payroll system and be pretty straight forward for most employers. But then every employer also has to take into account special types of unpaid leaves and those hours must be included in the calculations of hours of service. Those leaves are jury duty; FMLA, and USERRA,( the military leave and reemployment act). Over time, it’s possible that additional types of leaves could be added to this, SO if you don’t have a good absence management system in place, it’s going to be critical that you implement one and begin tracking it. Now as an aside, as a best practice we are recommending that if you’re not doing this already, that every employer set up a separate leave code for every type of leave that they are willing to support, whether paid or unpaid and the reason being there is always a possibility that either at the state or the federal level that different types of leaves could be added to this requirement and you want to be prepared to respond to that whether in 16, 17 or beyond. Finally, clearly your benefits system is going to be involved. Benefits is where you’ll be able to document you offered coverage to employees; you’re going to be capturing the actuarial real value and the minimum essential coverage requirement documentation-- and beginning in 2018 and beyond, you’ll be looking at the total cost of the benefits provided in the health care space to determine what if any Excise Tax liability you may incur. We can’t dismiss the unknown and every organization will respond to these just a little bit differently. For example, we know that employers will have to respond to information requests from the Exchanges. There will be reporting requirements to the federal government including the 1094 and 1095-C which we’ll be digging into in a few minutes within this presentation. We simply don’t know what other additional administrative challenges may emerge—and those challenges will most likely come with specific requirements. One of the things the employer is going to have to do is think about “Do I add staff to meet this, these demands, some of which are going to be somewhat unpredictable? We have no experience with these types of activities to date,” or “Do I outsource all of these activities or some of these activities?” That’s going to be a challenge that every employer is going to have to deal with. What’s the best balance for addressing these issues.
- SAY: Here is a simplified decision tree to help you assess your exposure to risk and penalties in regards to accountability. That first check is determining your ACA full-time and FTE population. We already established that this check doesn’t apply to you because you’re a large employer. So you say YES. The second check is whether you are offering minimum essential coverage. You have to offer it to 70% of FT/FTEs in 2015, 95% in 2016. If you don’t pass this check, you’re at risk for what we call the Sledge Hammer penalty. The third check is to determine whether that coverage provides minimum value – that’s 60%. And the fourth check is affordability. Failure in value or affordability, incurs the risk of another penalty. So your goal is to stay on the left side of this checklist to avoid the penalties on the right . . . how confident are you that you are 100% in the left? (Pause and let them answer)
- Purpose of Form Employers with 50 or more full-time employees (including full-time equivalent employees) in the prior calendar year will use Form 1094-C to report the information required under IRC Section 6056 (and Section 6055, for self-insured Applicable Large Employer (ALE) Members) about offers of health coverage and enrollment in health coverage for their employees. Form 1094-C must be used to report to the IRS summary information for each employer and to transmit Forms 1095-C to the IRS. The 50 or more full-time and full-time equivalent employee test applies on an aggregated group basis, but reporting is done on individual employer basis. Each employer in the aggregated group responsible for its own reporting is referred to in the instructions as an “Applicable Large Employer Member (ALE Member)” or “employer.” One Authoritative Transmittal Required ALE Members that are subject to Section 6056 reporting may file more than one Form 1094-C to transmit Forms 1095-C for certain employees separately. For example, an employer with two divisions may file Forms 1095-C for each division’s employees separately. Each submission of Forms 1095-C must have a Form 1094-C transmittal. But, one of the Forms 1094-C must be designated as the Authoritative Transmittal, which is a single Form 1094-C on which the employer reports aggregate employer-level data for all full-time employees of the employer (e.g., including all employees of both divisions in the example above). The Authoritative Transmittal is identified by checking the box on line 19 of the Form 1094-C. So your goal is to stay on the left side of this checklist to avoid the penalties on the right . . . how confident are you that you are 100% in the left? (Pause and let them answer)
- Say: The Trade Preferences Extension Act was signed into law on June 29th, 2015. This act increased penalties for all information returns and payee statements including forms W2 and 1099s and also includes the ACA reporting forms 1094 and 1095. These are the forms that are mandated for employers that are considered applicable large employers (50+ FTE) and the penalties for failure to file have been increased to $250 per form to a cap of $3,000,000. Since the form 1094 and form 1095 are separate forms, a failure to file by an ALE could result in penalties up to $500 per form and an aggregate cap of $6 million.
- SAY: ADP makes ACA easy. Because we have people who are dedicated to deciphering the ACA legislation and turning that into product requirements, we can assure you that you are collecting the right data to be compliant. We have processes in place to help you be confident that your annual reports will be filed on time. You can be confident that ADP is the right partner for you to help you minimize your risk for non compliance. We are here to help you build your blue print for ACA compliance. We know that it is the combination of our people, our experts; the processes we have mastered; and our intuitive technology that easily allows you to collect your time, payroll, HR and benefits data. Let us help you by understanding the right combination of people, process and technology that is right for your business.
- Say: ADP TotalSource provides you with comprehensive ACA compliance support. From start-to-finish, ADP helps you determine Applicable Large Employer status, calculate and capture hours for and complete and file 1094-C and 1095-C reporting, manage exchange notices and appeals, generate notices of coverage, manage penalty research and appeals, maintain compliance with reporting the value of health coverage on W-2s, and we track and report 24/7 status of ACA compliance.