What you need to know before choosing the right partner
Since its inception in 2010, employee benefits professionals have struggled with the requirements of the Affordable Care Act (ACA).
Benefits consultants — both new and experienced — still feel frustrated and confused with ACA requirements. Employers struggle just as well.
An ACA compliance consultant can make it easier for you to understand the requirements and implement them.
But where do you even start?
We've been working with benefits consultants and employers for 14 years on ACA compliance.
We've found that most people go straight to a solution without diagnosing the right problem.
You can prevent this by selecting an experienced partner to help from the start.
By the end of this article...
you’ll learn what to look for in an ACA compliance consultant
the 5 different types ACA consultants
Which ones are ideal for your situation
5 different types of ACA compliance consulting
Here are 5 primary the different types of ACA compliance consulting options you’ll find:
Reporting vendors are firms that specialize in the reporting aspects of ACA compliance. They may also have other reporting products for other employer reporting obligations. Most focus on the details involved in:
making sure the proper forms are filled out
with the correct information
sent on time, and
to the correct parties
Reporting vendors should be considered when a payroll solution isn’t available or there’s late or incorrect filings from the past. The idea is that there’s little data available, they can help. Many have deep expertise in how to deal with possible consequences of current or past mistakes. Sometimes they’ll even speak to the IRS on your behalf.
Payroll providers are the natural choice to get ACA compliance/reporting done. Because they have:
payroll data
experience in working with IRS tax forms
enrollment data
other key data sources
Most are able to process and file ACA reporting forms accurately and on time for employers.
Benefits compliance attorneys are helpful with more complex issues like:
late filings
complex organizational structures
penalty letters, etc.
Their detailed legal knowledge can be vital in these complex, high-risk situations. These scenarios require knowledge of the law that other types of ACA compliance consultants may not have. If you're seeking actual legal advice, they are the ideal option to choose.
Compliance consulting firms can also help with complex issues. Like benefits compliance attorneys, these firms often specialize in more complex situations. However, these firms often come with operational expertise and advice. This helps to ensure that ACA compliance is done with consistent and correct process.
Finally, these firms often have expertise that lies outside of the scope of the ACA. This can be helpful in minimizing the total compliance exposure employers find themselves dealing with.
HR consulting firms usually operate on a broader scope than the types listed above. Most have deep expertise in employment law and other HR-related subjects. In most cases this skillset also includes expertise on the ACA and it’s requirements.
Employee Benefits Brokers usually help with the plan design and employer contribution components of ACA compliance. However, they may also help with:
problems arising from compliance
less complex issues
penalty letters, etc.
The variance in expertise and knowledge is wide. Make sure you understand a specific broker’s capabilities and resources before using them to tackle complex issues.
ACA compliance requirements: who needs to do what?
While the scope of this article can’t cover all the requirements of the ACA, here are a few highlights to focus on.
ALEs and requirements:
One of the most important aspects of ACA regulation is understanding if an employer is an as Applicable Large Employer (ALE).
This is because ALEs are subject to more reporting and "affordability" requirements than smaller employers.
What is an ALE? An ALE is defined as an employer who has more than 50 full-time employees. It is important to consider the following when determining ALE status:
The ACA's definition of "full-time employee"
The specific timelines for counting employee numbers
Part-time employee consideration
Seasonal employee consideration
And other factors
Getting all the details right for ALE calculation is one of the most important aspects of ACA compliance.
One of the critical rules to understand for counting employees is the look-back measurement period. You can learn more about this method by reading our blog here.
Self-insured vs fully-insured employers:
Both self-insured and fully-insured employer sponsored plans are subject to the ACA's rules. However, there are very important differences between the two.
One of the key differences is that ACA reporting is required for all self-funded employer groups, regardless of size. Fully-insured employers’ requirements largely center around their status as an applicable large employer. Also, the forms used for reporting and the affordability calculations vary across each type of employer.
Brokers vs employers:
It’s important to note that the employer is the responsible party when it comes to complying with the rules and regulations of the ACA. That said, employee benefits consultants/brokers can play a critical role in helping employers to get compliant.
Benefits consultants often help employers with ACA requirements by:
Answering complex questions related to compliance
Helping to provide premium affordability calculations
Introducing and assisting with the right resources for reporting
Sometimes even providing reporting services through an internal partner
Employers should not be afraid to lean on their broker for ACA compliance assistance. Brokers should make sure not to promise to “handle all the compliance” for their employer groups.
Example/Case Study
Finding the right ACA compliance consultant, at the right time, isn’t just about escaping financial penalties. It can also save you an enormous amount of time and stress.
A few years ago, we came across a former business owner who received a IRS penalty letter in the mail. Upon inspection, it was for a company she sold 2 years prior. The penalty letter was for failure to file ACA forms.
The letter stated that her W-2 count was high and triggered an inquiry on why they hadn’t filed the 1095 B and 1094 C forms. The IRS had cross referenced their W-2 counts and filings and had found the story lacking. The W-2 count put them well over the threshold of being an ALE yet their filings didn't match up to what was required.
The problem she faced was that she had sold the company and no longer had the data to support her actions. Her broker had told her incorrectly that year that she was not an ALE because she had so many part-time employees. Without the supporting data, fear overtook her.
In an attempt to resolve the issue, she was forced to call an employee benefits attorney. She needed someone to help her speak to the IRS and to be able to produce some sort of filings for the year.
Eventually, her financial cost was lessened from the original penalty, but the situation caused a ton of stress. The situation could have been easily avoided had she consulted the proper ACA compliance consultant in the first place.
Taking Action
Compliance with the ACA, many years after its enactment, remains complicated and frustrating. Understanding the requirements, who they apply to, and how are often misunderstood. Both experienced and inexperienced HR and benefits professionals still struggle with the ACA.
The world of ACA compliance can be simplified by:
Understanding the different types of ACA compliance consultants
Studying the basics of the ACA regulations
Using some simple tools
And partnering with the right firm
Whatever your role is, remember to thoroughly understand the problem you’re facing before you jump into a solution. We find that in most cases, a misdiagnosis of what’s required is the root cause of ACA penalties.
By slowing down, identifying the situation correctly, and finding the right partner to assist, you can greatly reduce your risk.
Benefits Compliance Solutions works with employee benefits consultants to understand and apply the rules of ACA compliance. Our deep knowledge of:
Benefits agency operations
ACA rules and regulations
Account management
Employer common issues
Related areas of compliance
Make us an ideal fit for benefits consultants struggling with how to help specific employers, or their entire book with ACA compliance.
If you are a benefits consultant seeking ACA help, let's talk. With the right help, you can help your employer partners shine. Book a call at bit.ly/BCSintrosession today.