Ten Cost Considerations for In-House ACA Compliance
It’d be nice to have another 2 month extension this year for ACA filing. It'd also be nice If I could see the Chicago Bears win the Superbowl again before I die.
I’m not holding my breath.
To comply with in-house resources, or outsource ACA compliance—that is the question! As we approach our second year of mandatory IRS filing (wow that was fast) Applicable Large Employers subject to the Employer Shared-Responsibility Mandate of the Affordable Care Act are faced yet again with the decision on how they will complete their annual filing requirements.
For those conducting the cost-benefit analysis of in-house filing, here are ten costs to consider when looking to comply with in-house resources. Brace yourself, this might sting a little.
1. The cost of regulatory research: How many webinars, seminars, and lecture series have members of your team sat through over the past 2-3 years to learn the Affordable Care Act? How much of them were helpful, or redundant?
Sum it all up, researching the ACA is an ongoing and time-consuming process, and it’s difficult to identify when enough is enough. The threat of missing some key reporting insight (I don’t know what I don’t know) is enough to create a level of insecurity that fosters an insatiable appetite for educational content on the ACA.
Ashley, an HR Manager for a 450 employee home care agency, spent the better part of a month researching the ACA prior to starting her 1095-Cs. “In 2015 alone, I spent close to 4 weeks researching the ACA, and that was before I even started filling out any forms or compiling any data for reporting.” That’s one-month’s salary, or $3,838.40 for the average HR generalist.
2. The joy of acquiring a TCC: If you are filing electronically (required for groups filing more than 250 1095-Cs), you will need to set aside time to coordinate with the IRS prior to filing.
Enjoy waiting on hold.
Any entity that is filing electronically needs to register with e-Services for a Transmitter Control Code (TCC). Applying for a TCC should be done well in advance of filing, as registering to use the IRS e-Service tools can take some time. Users applying for e-Service access will submit their application, await the arrival of their confirmation code via U.S. Postal Mail, and complete their registration by entering their confirmation code no later than 28 days from their initial request.
3. Tracking Full Time Employees: Tracking full-time employees (those employees expected to work more than 30 hours a week, or those variable hour employees that have averaged more than 130 hours a month over a given 12 month measurement period) will be more difficult for some employers than for others. Organizations that have a large contingency of variable hour employees, such as hospitals, nursing care, retail, restaurants, hotels, and manufacturing will need to develop systems for tracking employee hours across standard and individual measurement periods in order to accurately define their full-time population (the people to whom the ACA requires employers to offer health coverage).
4. Have you heard about administrative penalties? For 2015 filing, most of the ACA’s administrative penalties were waved as long as employers could demonstrate that they made a “good-faith effort” to comply with the ACA’s reporting requirements.
In July of 2015, the Trade Preference Extension Act (click here for the full scope of penalties) established some significant penalties for administrative filing errors. For 2016 reporting and beyond, employers will be assessed administrative filing penalties for incorrect or late filing, amounting to $50 to $500 per error—in some cases without any financial cap.
5. Data collection Labor Cost: ACA eligibility tracking and reporting will require data from payroll, benefits election or online enrollment systems, time-tracking systems, and HR policies or collective bargaining agreements. Compiling the data from disparate systems will require dedicated time and staff resources on a monthly basis.
6. Maintaining an audit trail: The IRS has warned that controlled-groups will be among the first groups targeted for auditing following the first year of filing. Such groups will need to produce:
- Documentation of coverage offers to full-time employees
- Documentation of coverage waivers, declinations, and elections for both employees and dependents
- Measurement period and hours data substantiating how the employer determined her full-time employees amongst her variable hour workers.
- Summaries of Benefits and Coverage, and how they were presented to the employees
- Employee salary data for determining coverage affordability
7. Lawyer fees: Navigating a new regulation can mean a number of phone calls and meetings with legal. Depending on your region, you may be incurring $50-$520 per hour with each meeting.
8. The cost of turnover: There are a number of studies that reveal the cost of turnover being anywhere between 6-9 months of a managers salary. Consider the ACA reporting training and research investment previously discussed, and the impact that has on an employer’s compliance management when that intellectual capital walks out the door.
9. Paper, Mailing and Postage: Depending on the size of the organization, this may be a small, but no less significant cost to in-house ACA compliance management and reporting. A study conducted by the Minnesota Office of Environmental Assistance estimated that associated costs with printing could be as high as 31 times the cost of paper (when factoring storage, copying, printing, postage, disposal, and recycling).
10. Time associated with completing the forms: At some point, all of the data compiled from payroll, benefits, and HR policies needs to be translated into the correct alphanumeric code in lines 14 and 16 of the 1095-C. For the majority of cases the codes will look identical for employees covered for the entire calendar year, with mid-year hires, terminations, and salary adjustments breaking the routine and requiring a little more analysis.
What’s the bottom line? The cost of in-house ACA compliance is riddled with associated labor, overhead, and opportunity costs, as well as in increased compliance liability. The impact of these costs will fluctuate based on employer size, employee makeup, HR talent and competency, and workforce technology resourcing. Does it make sense for some employers? Definitely!
Does it make sense for you? That is the question!