With an emphasis on practical strategies to improve productivity and performance, and limit potential liabilities, Bulletin to Management™ concisely analyzes new developments in employment and...
By Lydia Beyoud
Oct. 3 --Reports of technological glitches on state and federal health care exchange websites for individuals could serve as a reminder to employers about the technological systems they will need to have in place to meet their own compliance with the Affordable Care Act.
Though large employers received a one-year reprieve on reporting requirements and excise tax penalties for failure to offer affordable health care coverage to employees, 12 months may not be enough, practitioner Anne Phelps said during an Oct. 3 EY webcast.
“This is really the first time in the history of employers providing benefits that we've seen this kind of data collection” to be provided to both the Internal Revenue Service and to employees, said Phelps, a member of EY's Washington Council.
Beginning in January 2016, employers will have to provide “an unprecedented amount of data” on health care benefits offered to employees, including details on who received an offer of coverage, what the coverage included and what its value was, Phelps said.
Although employers won't have to report until 2016, that “doesn't mean there's not a lot of activity” to be done to have systems in place before then to track the number of full-time employees, obtain the necessary data from them and communicate to employees about their health care coverage, Phelps said.
A key question for employers to consider in setting up their systems is where to find all the data necessary to meet the measuring and reporting requirements under ACA once the Jan. 1, 2015, compliance deadline kicks in, said Clayton Gammill, with EY's Human Capital Practice department.
“If a company has three or four payroll systems they grew through acquisition,” with multiple benefits providers, “all that data is not in one place” and they are going to have to consolidate reporting to give to the IRS and employees, Gammill said.
Companies with separate human resources, payroll and benefits data systems will also face more complexity in meeting the rules, he said.
“What I think most people need to do is bring the data into some centralized place,” Gammill said. Whether this occurs through building a data warehouse or hiring a third-party service provider, “they need to make sure there's data cleansing, there's data consistency, so it's not just a flat data dump,” he said. “There's going to have to be some logic involved.”
The architecture of these data management systems will be heavily dependent on the reporting options provided under the ACA that an employer chooses to use, Gammill said.
On Sept. 5, the Treasury Department and the IRS released proposed rules on reporting minimum essential coverage under tax code Section 6055 (64 BTM 292, 9/10/13) and ACA employer information reporting requirements under Section 6056 (64 BTM 289, 9/10/13).
“Ultimately what you'll need to deploy is reporting based on the method you decide to use. However you decide to use the 6055 and 6056 reports, you've got to make that decision because it requires different data,” Gammill said.
While employers received a momentary reprieve from their reporting obligations, they will still have to engage with the exchanges since they opened to individuals on Oct. 1, Phelps said. Interactions with state and the federal exchanges will vary widely, as evidenced by the variety of requests the exchanges have already made of employers about their employees, she said.
Because the ACA allowed states to establish their own health care exchanges, “each state has chosen a little bit of a different path,” Phelps said. To date, more than half of the 50 states have opted for federally facilitated exchanges, with the remainder implementing their own insurance marketplaces or an alternative or hybrid model.
The multitude of state responses to the ACA will affect how employers can appeal the determination of an employee's eligibility for premium tax credits, which could subject an employer to a shared responsibility payment, Phelps said.
State and federally facilitated exchanges will make the initial eligibility determinations, and may choose to contact employers as part of a sample review process, she said. It will be critical to ensure employees going to the exchanges now have all the information they need, she said.
“That interaction is so important to make sure that employees understand if they did have an offer of coverage, that they are eligible for that credit,” Phelps said. Accurate information from the employer that is provided by employees to the exchanges is critical to ensure employers minimize their risk of being hit with undue penalties, she said.
“The reason why is there's a link back,” Phelps said. “If employees get a tax credit, that is the link where the employer may be on the hook for paying an excise tax.”
A large number of exchange notices could be an important early warning sign that employees don't have the right information needed to obtain coverage, she said. That means employers need to communicate with their employees and help them determine whether they should be receiving a credit, Phelps said.
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