Affordable Care Act Reporting challenges
The Affordable Care Act (ACA) involves special filing requirements for employers with more than 50 full time equivalent employees. Classified as "applicable large employers" (ALEs), these companies are required to offer minimum essential health care coverage to 95 percent of their full time employees and dependents.
Of course in today's political climate there is a lot of discussion about repealing the ACA, but no definitive course of action has been agreed upon by Congress, and until such time taxpayers are required to report ACA activity annually. Penalties can be steep, so ALEs should examine their recording and collection of relevant information for the upcoming tax year. Some of the most common challenges for employers include:
1. Segregated databases and discrepancies between those databases
2. Improper application of the ACA methodolgies
3. Insufficient documentation of ACA compliance
Many ALEs have separate data sets for timekeeping, benefits, HR, and payroll. Because ACA compliance requires information from each of these areas, an integrated database is best. Without a resource that pulls together these pieces of information employers are left with an administrative headache when creating reports for ACA compliance. Additionally different data sets will likely result in discrepancies, which creates another headache when discrepancies need to be reconciled. If one holistic data set is not reasonable for your company, we highly recommend tracking ACA information and resolving discrepancies on a monthly basis.
The ACA methodologies for calculating full time equivalent employees are complex, which can result in a misinterpretation or incorrect application. This is especially relevant for workforces that have variable-hour, part time, or multi-position employees. Taking time to have your calculations reviewed by another party can save time and increase accuracy for reporting.
Without proper documentation it can be very challenging to defend positions on a filing. Documentation for company policy and procedures relevant to ACA and procedures to track employee activity should be thorough, and internal controls should be documented. The US Treasury has determined that ACA information will be audited by the IRS, which leads to exposure of an IRS audit for income tax or other areas of compliance.
The new reporting requirements for the ACA are complex and can seem insurmountable without the right staff, consultants and technologies in place to properly oversee the process. Consider getting ahead of the issue by assessing how and where your data is kept; verify that your calculations are correct based on ACA methodologies; and that sufficient documentation exists to support your informational filing.