Negotiating the compliance landscape for controlled and affiliated service groups was always a difficult task for benefit advisers and their corporate clients. Now the Affordable Care Act has made it even more challenging.
Although large corporations are accustomed to intricate benefit rules, including those pertaining to the shared responsibilities of related businesses, the ACA now requires individualized rather than consolidated reporting. That’s a departure from the previous norm, and comes at a time when the employer threshold for offering health insurance is being raised from 70% of employees in 2015 to 95% for 2016.
“That’s why IRS wants this reporting done employer by employer,” explains Leslie Anderson, a partner with Mercer’s Washington resource group “There’re a lot of complexities. At a minimum, for large employers with a complex corporate structure, it requires pulling together different parts of the company and different advisers.”
The new ACA rules force companies to take a deep dive into their employment rolls and benefit offerings or else risk stiff financial penalties.
“I think this is catching some employers by surprise,” says Anderson. “You need to think about if you have temporary workers, interns; and then you need to understand who is eligible for coverage.” Moreover, “This determination needs to be made on a monthly basis. You shouldn’t be waiting until the end of the year to look at it.”
Calculating which employees are full-time under the ACA’s rules is complicated. An employer must determine which workers reach the 30-hour-a-week threshold; at which company or business unit those hours are worked; what coverage they may have been offered and by which entity – all of which “is not always as obvious as it seems,” notes Anderson.
“This is not [how] health plan administrators are used to thinking about their coverage,” she says. “Employers really have to work with a number of different advisers to determine what their corporate structure is, or if they’re not a corporation, who the legal entities are. This is an area where there’s a need for a lot of education.”
Although the IRS has a good-faith compliance standard for 2015 reporting, the penalties for non-compliance are $250 per return per year up to a total of $3 million. The penalty for intentional non-compliance is doubled to $500 per return per year.
“Employers really have to work with a number of different advisers to determine what their corporate structure is, or if they’re not a corporation, who the legal entities are. This is an area where there’s a need for a lot of education.”
Employers whose non-compliance results in a failure to offer the minimum essential coverage to its full-time employees can also incur additional ACA penalties.
So how should advisers help their clients contend with all of this? Anderson recommends that they view their role as one of education, and that they work alongside other experts as part of a team that can respond to all the challenges facing a particular client.
“I think there are limitations on what the benefit adviser can do,” Anderson acknowledges. “Employers will need to pull in resources from different areas, including some legal advice.”