By: Matt Ingold

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December 1st, 2015

Payroll Vendors or Employee Benefits Software Providers for Obamacare Reporting: A Comparative Service Analysis

Workforce Management | 1095-C | Affordable Care Act | Obamacare Reporting | online enrollment software


Payroll or Benefits Management Software: Both vendor categories have raised their hands to take on the hefty administrative burden of providing Affordable Care Act Administrative services. At the end of the day it begs the question: Who is best suited to service the client?

If we’re evaluating the ability of payroll vendors versus benefits management systems to perform the administrative requirements of the Affordable Care Act, there are 2 main categories to assess: relevant ACA data accessibility and regulatory knowledge.

Payroll or Online Benefits Enrollment Software: Which has the most pertinent data for Obamacare Reporting?

If you’ve embarked on the Obamacare compliance journey, then you are probably well acquainted with the extensive data consolidation required by ACA software solutions. In recent AIR webinars, the IRS communicated a 7 week industry average for data collection.

Assuming that payroll is also housing employee hours information, the below diagram provides a side-by-side comparison of ACA related data housed by payroll or benefits management systems.


Payroll systems are better equipped with the data needed to identify an employer's full-time population, or, those employees under Obamacare that must be offered coverage. As long as the payroll system has the ability to allocate employee hours into the appropriate measurement period, then you have a solution for automating your eligibility testing. This will help complete Part III of the 1094-C transmittal form, and identify which employees need a 1095-C. 

Related Blog: What to Look for in an Obamacare Software Solution

Payroll is also better suited for determining whether or not an employer sponsored plan is affordable. It houses both wage and salary information. All it needs is the employee share of the lowest cost single coverage only option offered by the employer, and it will be able to determine whether or not that coverage is affordable. This employee contribution would be used for completing line 15 of the 1095-C

Benefits enrollment software is better equipped with the data needed to complete lines 14, 16, and Part III of the 1095-C for self-insured cases. It houses the type of coverage offered to employees (single, employee/spouse, employee/dependents, etc.) and the date the coverage offer was made for completing line 14. It records whether or not the employee enrolled in the coverage for line 16. Finally, it records dependent enrollment history for completing Part III for self-insured cases. 

From conversations with different HR professionals, the hours tracking data is the easiest to track through payroll reports and Excel spreadsheet management. Furthermore, nearly every employer already has technology managing his or her employee hours data. Enrollment data tends to be more dynamic, unpredictable, and manual Obamacare information to track. Most mid-market employers are still using paper systems for tracking employee benefits information.


Obamacare Solution


Payroll or Benefits Support Staff: Who is more likely to have technical knowledge of the new Healthcare Regulation?

Without question, any ACA administrative service will need to provide some element of consultation and regulatory expertise. 95% of 1095-C Reporting Cases will be easy plug and play: enter data A-Z and the system spits out your reports. It’s the other 5% of cases that basic system logic does not cover which may need a manual override to get final forms and filing IRS-ready.

While it’s difficult to do an apples-to-apples comparison of regulatory expertise from typical payroll vendors to online benefit enrollment systems technicians, it’s arguable that the ACA is more likely to fall into the wheel-house expertise of benefits enrollment software technicians than it will payroll providers.

online benefit enrollment systemIn both cases, system technicians will be able to help manipulate the system to produce the required results. The question comes in assessing whom is more likely, payroll or benefits management technicians, to determine what the final results should be for a given case. Are system technicians and account managers alone on an island? Do they have access to subject matter experts within the organization? Are they subject matter experts themselves?

Ideally, you have an account manager that can provide both technical support and regulatory consultation. Such a combination is much more likely to be found in an organization with a healthcare focus. There is greater incentive for online benefit enrollment software developers to develop expertise in new healthcare regulations than for payroll providers. It has had a more profound impact on their industry than that of payroll.

Related Blog: What to Look for in an Online Benefits Enrollment System

The Ideal Scenario

Integrated payroll and benefits management systems. Jinx! I know you were already thinking of that. There are a lot of efficiencies that can come from integrated payroll and benefits enrollment systems leveraging shared data. Formerly viewed as a luxury, such system integration for medium-size and large employers has grown into a greater necessity with the advent of the Affordable Care Act. With increased competition and development in the HR technology market, such systems are more affordable and more easily implemented than in years past. 


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About Matt Ingold

Matt serves as Benetech's Director of Business Development. He helps employers reduce the cost of personnel management, and discover where improved talent management can give their business a competitive advantage.

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Mistakes are expensive, especially when building benefit plans.

We've outlined the 3 most common mistakes employers make when offering benefits in a quick ebook. Get your copy free when you subscribe to our blog.