Commentary: The Affordable Care Act is bringing new administrative complexity to employers offering health plans to their employees. It includes new requirements for employee tracking and government filing, and represents a significant increase in employer liability. These changes will phase in gradually, with different timetables for different size employers, and full implementation required across the board by 2018.
First off, W-2 reporting will change. Employers issuing more than 250 W-2s will now have to calculate total employer and employee health care premium costs and also report that on W-2s.
Starting this year (2015), waiting periods for eligible members’ health care enrollment cannot exceed 90 days. The clock starts ticking based on the day of hire, birth, marriage or other life event. It is imperative that benefits administration systems support compliance with this requirement.
Managing standard measurement and stability periods are another new responsibility. Standard measurement periods are used to define which employees are full-time and which are part-time for purposes of health insurance eligibility.
An employer has the flexibility to choose a standard measurement period of between three and 12 months. They may also determine when the period starts and ends, as long as it is consistent and uniform for all employees in the same category. If an employee averages at least 30 hours per week during the measurement period, he or she is eligible for coverage during the subsequent stability period.
The stability period must be equal to or longer than the measurement period, and cannot be shorter than six months. Since new hires get their own measurement period and all employees are subject to measurement each year, employers are in a constant state of measurement. In addition, there are also specific rules for seasonal hires and rehires. This will lead to an ongoing lifecycle of measurement and stability periods and people going in and out of eligibility. All of this has to be tracked and managed carefully. Employers with variable-hour schedules for some or all employees, and employers with high employee turnover who process a lot of new hires, will find this especially challenging.
Finally, the ACA added Sections 6055 and 6056 to the Internal Revenue Code. These sections require certain employers to file information returns with the IRS and provide statements to their full-time employees about the health insurance coverage the employer offered. The purpose of these new forms is to provide the IRS with the information it needs in order to assess penalties to employers that fail to offer minimum essential coverage to full-time employees.
There are two types of new forms. The 1095-C is an employee-level form, and the 1094-C is an organization-level form. Employers must file a separate Form 1095-C for each of its full-time employees, and a Form 1094-C for all of the returns filed for a given calendar year. Employers must comply with these new reporting requirements beginning in 2016, reporting on calendar year 2015.
To ease the administrative burden and avoid penalties, automating these tasks is essential. Payroll and benefits administration platforms are now offering a variety of automated solutions. With deadlines for these complex new requirements looming, the time to start considering health care benefits automation technology is now.
What employers should place the most emphasis on is finding a solution in which payroll and benefits administration systems are tightly integrated and able to communicate easily and effectively. In such a system, payroll time tracking information can be shared with the benefits administration system, triggering a message telling benefit managers which employees are eligible or ineligible for benefits without having to do all these calculations manually. That would then kick off the automated enrollment process, helping employers stay within the 90-day shot clock.
Eligible employees would get a notification, letting them know, “You are now eligible for benefits. Please log in and enroll.” Employees whose eligibility status is changing would also get the appropriate notifications and instructions. Once those enrollment activities are completed, the information is transmitted back into the payroll system to cover the W-2 and other required reporting.
The ability to have real-time reporting is critical. This will allow employers to look at the standard measurement and stability periods so they can appropriately manage the employee population and project costs.
Benefit managers may also want to have the ability to integrate and manage workplace wellness programs. These are not required, but the opportunity to capture significant cost discounts on health care premiums make these very attractive.
All of these processes can be handled by a single platform, or by integrating separate solutions from payroll, benefits administration and possibly wellness vendor data. There are several options depending on what systems are already in place.
All these new rules may seem cumbersome, but organizations that plan ahead and select the right benefits technology platform should be able to easily take them in stride. The time to get moving on this now. Otherwise, employers will be staring at a big, confusing pile of paperwork down the road.