Survey Results on the Affordable Care Act
Following a survey conducted during the first quarter of 2015 by Equifax Workforce Solution and Price Waterhouse Coopers (PwC), it appeared that most employers had no idea on how challenging Affordable Care Act (ACA) reporting will be.
This has led many employers to consider an outsourced solution. The survey gathered information from 480 employers of different sizes from 36 different industries across America. The overall results indicate that the new ACA reporting requirement is confusing to most employers, and many had not yet decided on how they will comply. For example, only 10% of employers were reported to have outsourced or had an in-house solution in place.
ACA reporting readiness
From the survey, only a small fraction of employers had already implemented ACA reporting solution while most were still considering or had not begun considerations. About 20% of small employers are considering an outsourcing solution, and the number grows as the size of employer increase. About 30% of medium –sized employers are considering outsourcing and closer to 37% of large employers had already committed to vendors. In the addition, 35% of large employers plan to outsource solution from vendors dedicated to ACA compliance.
Data accuracy and aggregation
65 percent of employers’ respondents indicated that data quality and complexity in reporting was a concern. Many employers use different systems for benefits payroll administration, HR information systems, and leave absence system considering that some of the data may be held by third parties. Aggregating all of this data every month for reporting can be challenging, especially due to the degree of scrutiny of IRS forms 1094 and 1095. These call employers to make a business decision on how to collect necessary data and create an on-going process for future years.
Responding to exchange notices
Employers can expect to receive exchange notices when employees apply for subsidized insurance, which can trigger penalties on the employer. The employer may validate or challenge employee eligibility for subsidy on receiving the notice, thus mitigating the risk of penalties. Related to reporting issue, the survey indicates that 43% of participants were concerned with responding to exchange notices.
Specifically, the multi-state employers with many work-sites and employees, response to exchange notices on a timely basis may proof to be a challenge since state exchanges may vary in their response procedure and notices. Timely response to notices is crucial, considering that there is no way to predict the volume of these notices. High level of notices and others inquiries from IRS create challenges. More than 61% of survey respondents with more than 20,000 employees were concerned to exchange notices respond.
Employers are required to identify their employee for ACA reporting, and this may call them to review their independent contractor population. About 60% of respondent reported that the human resource department is responsible for determining if individuals are treated as independent contractors. 14% of respondent rely on the legal departments for this determination, while 12% did not know who would be responsible for this determination.
Type of Vendor
Employer requirement varies on the type of vendors they intend to or have already outsourced, about 48% of smaller employers intend to use their payroll vendors while closer to 35% intended to use dedicated ACA compliance vendor. 18% of mid-sized employers were still in the process of determining their out-sourcer and 44% of the respondents who had more than 30% part-time/variable hour intended to use a dedicated ACA compliance vendor.
Delivery of forms
Many employers also had not decided on how they are going to deliver necessary forms to employees, 24% of participating employer plan to perform this in-house and 30% plan to use a vendor. 53% of employers with more than 30% variable hour/part-time employees were undecided on how to deliver the necessary forms to employees and IRS. Besides, companies with large variable hour/ part-time employees may experience a challenge associated with reaching out to employees and have them elect electronic forms on an on-going process since workers have a high level of turnover.
Most employers have already begun tracking employees’ hour of service with the aim of determining full-time employee status. With large variable hour/part-time workforce, the retail and consumer industry has to track employees’ hours to determine the medical plan eligibility for longer periods of time.
Employers have numerous concerns with ACA reporting and employer mandate. The most pressing concern for most small employers has been to understand the various ACA reporting options, whereas most large and mid-sized employers are concerned about data quality.
For all respondents, concerns include administrative burden in terms of time and workload, complexity and access to data, tracking variable/part-time employees, establishing company-wide policies and procedures, and distribution and production of reporting.
In summary, employers are likely to face many challenges related to ACA reporting and thus the need to make important business decision on whether to implement in-house or outsource reporting requirement.
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