The January 1, 2015 effective date for new Affordable Care Act compliance requirements is less than 90 days away—and with HR and Payroll gearing up for open enrollment and year-end, be prepared with an ACA compliance checklist...  

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2015 ACA Compliance Checklist

Wed Oct 8, 2014

The January 1, 2015 effective date for new Affordable Care Act compliance requirements is less than 90 days away—and with HR and Payroll gearing up for open enrollment and year-end, be prepared with an ACA compliance checklist:

✔ Employer Shared Responsibility ACA Sec. 4980H.

For employers with 100 or more full-time employees the so-called “Play or Pay” mandate is effective for plan years beginning on or after January 1, 2015. To avoid compliance penalties employers subject to 4980H must offer “minimum essential coverage” to full-time employees and their dependents that is both “affordable” and provides “minimum value.”

Employers face two Play or Pay penalty scenarios:

 (1) Greater Penalty: Employer does not offer minimum essential coverage to full-time employees (or offers coverage to fewer than 70%) and at least one full-time employee qualifies for a premium tax credit to help pay for exchange-based coverage. Liability is $2,000 times the number of full-time employees, minus up to 80 employees for 2015;

(2) Lesser Penalty: Employer does offer coverage to at least 70% of full-time employees but for particular employees the coverage proves unaffordable or fails to provide minimum value. Liability is $3,000 for each full-time employee that qualifies for a premium tax credit to help pay for exchange-based coverage.

It’s worth noting the specific ACA definition of “affordable” health coverage: the employee’s share of the premium for the employer’s lowest-cost, self-only coverage option is not more than 9.5% of the employee’s Box 1 W-2 wages, assuming the employer elects the W-2 affordability “safe harbor.”

Additional details can be found in a recent Ceridian Blog post.

✔ Employer Health Coverage Reporting.

Employer health coverage reporting is the fulcrum of the health reform law. Indeed, it is the way IRS will enforce both the individual mandate to have insurance and the employer shared responsibility mandate to offer coverage to full-time employees.

Similar to W-2 reporting, Code sections 6055 and 6056 require employer plan sponsors annually to file forms with the IRS reporting health coverage information. Depending on whether health plans are fully insured or self-insured, employers will file Forms 1094-B and 1095-B or Forms 1094-C and 1095-C.

An important 2015 ACA compliance priority, therefore, is to ensure that your HCM system is able to collect, verify and provide the data needed to report health coverage information to the IRS and furnish statements to employees.

Health coverage data will be collected during 2015 so the required forms can be filed with IRS and furnished to employees early in 2016. Best practice employers will build a systematic reporting process on a platform with electronic documentation capabilities that will reflect employment and benefits decisions and when they were made to comply with Internal Revenue Service reporting requirements.

A recent Ceridian Blog post explains ACA reporting requirements.

✔ Determination of Full-Time Employee Status.

Perhaps no 2015 ACA employer compliance mandate is more onerous than tracking hours worked to determine employees’ full- or part-time status. Since the law requires most employers to offer health coverage to full-time employees starting in plan year 2015, employers must document who is a “full-time” employee under the Affordable Care Act definition.

Employers will document hours worked because when coverage is not offered to an employee, an employer must be able to demonstrate that coverage was not offered specifically because the employee did not work a full-time schedule.

Most employers will adopt a “Look-Back” Measurement Method of 3-12 months to determine whether ongoing employees averaged 30 or more hours a week. Employers will then use a corresponding “Stability Period” during which qualifying health coverage will be offered. For 2015 only, employers may use a 6-month 2014 look-back period and a 12-month 2015 stability period.

Managing full-time status determinations with look-back and stability periods likely will be straightforward for most “ongoing employees.” But issues will no doubt arise for “ongoing variable hour employees” and for new employees not expected to work full-time. Employers will also face challenges in correctly categorizing seasonal employees, short-term employees and breaks in service.

Clearly managers will need a single application design that enables precise tracking of hours worked and determinations of eligibility for offers of coverage. To categorize employees, verify benefits eligibility and document timelines for offers of coverage, employers will want to reflect changes in hours worked in payroll, time and attendance and benefits—with all information available in real-time.

New Compliance Standard—

This ACA checklist illustrates that the year 2015 demands a new standard for Affordable Care Act compliance. The ACA Compliance Trifecta – “Play or Pay,” health coverage information reporting and full-time status determinations will put enormous pressure on employers of all sizes.

Employers are advised first, to establish an ACA 4980H compliance strategy with clear lines of responsibility and C-level buy-in; and second, to put in place the kind of single solution, best-in-class HCM system that will allow seamless management of ACA compliance requirements.