Technology

Choosing the Right HCM Software Provider Is Essential to ACA Compliance

By

Robert Barclay

| Apr 6, 2016

The complex nature of the Affordable Care Act (ACA) is well documented, and for good reason. The criteria for applicable large employers (ALEs) contain a sea of intricacies, which are tough to keep up with. It’s no wonder, then, that so many employers rely on payroll providers to assist them with their ACA duties.

But not all human capital management (HCM) providers are equipped to handle ACA challenges, and it’s no consolation that the ACA does not hold third parties accountable for mistakes.

So what’s an employer to do?

Consider choosing an HCM provider that offers the educational, monitoring, evaluation and reporting tools needed for compliance.

Teach You the Ropes

As an ALE, you’re subject to the ACA’s employer shared responsibility (ESR) provisions. Your HCM provider should help you understand your responsibilities, which include:

  • identifying all full-time employees, including full-time equivalents, as defined by federal law;
  • providing the IRS with detailed information on full-time employees;
  • determining the type of coverage offered to full-time workers;
  • monitoring employment changes that may cause you to have 50 or more full-time employees, which would subject you to the ESR; and
  • evaluating your group coverage to ensure it meets ACA standards.

Your provider should explain key aspects of the ACA in plain language and provide you with ongoing legislative updates.

Alert You of Critical Occurrences

Chances are, you’ve got a full schedule, which makes monitoring the issues affecting compliance a burden. Still, it’s a necessary task, which can be simplified by an ACA dashboard that:

  • tells you when you’re reaching ALE status;
  • alerts you when full-time and part-time employees are nearing full-time status; and
  • notifies you when employees’ look-back measurement periods are ending.

Above all, alerts and notifications give you timely information and the ability to better manage hours of service for your employees.

Assess Historical and Current Data

At the heart of ACA noncompliance, you’ll likely find errors that could have been avoided through careful data analysis.

For example, employees must be properly categorized as full-time, part-time or seasonal. In addition, accuracy of hours worked is important to determining ALE status, which employees are full-time, and the end-of-year reporting process. Mistakes in these areas can be caught and corrected beforehand through periodic data reviews.

An enhanced evaluation tool lets you access audit trails of historical data, plus review current ACA information. These reports are crucial to regulatory compliance and can help you fulfill your reporting requirements. Evaluation also gives you actionable insights into your responsibilities as an employer.

Reporting That Satisfies IRS Criteria

ALEs must report the total annual cost of their employer-sponsored group health coverage on employees’ W-2, provide employees with a statement of coverage, and report to the IRS through Forms 1094/1095 –B or –C.

The information provided on these forms needs to be correct because the IRS uses it to determine whether:

  • an employee qualifies for premium tax credits;
  • you’re complying with the “pay or play” mandate; and
  • individuals have the minimum essential coverage.

Considering the extensive scope of ACA reporting, a payroll system that facilitates the following is of paramount importance:

  • employment status changes,
  • coverage affordability and other qualifying factors,
  • trends in employee hours and ALE status, and
  • minimum value and “pay or play” calculations.

In the end, the right payroll provider has a simple goal: to relieve you of your worries by mitigating compliance risks, including those associated with the ACA.

About the Author

Robert Barclay

Robert Barclay has been the Tax Research Team Lead at Paycom since 2012, and has been instrumental in such company projects as the development of its Affordable Care Act compliance product, implementation of geolocation services and redesign of Form W-2. He joined Paycom in 2011, bringing more than 20 years of experience with the capital markets consulting practices of Ernst & Young in Memphis, Tenn., and Birmingham, Ala.; and Causey Demgen & Moore in Denver, Colo. A native Oklahoman, Barclay is a graduate of Rhodes College in Memphis, where he played football as linebacker.

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