ACA and data maintenance: what to know, where to get it, and how to keep it in check
Data gathering seems like a simple, if tedious, task. So why is it that so many employers struggle with this exact task when attempting to complete ACA reporting?
Tax forms are generally full of standard employee information, but the ACA requires even more, drawing from payroll and benefits data that must be properly “translated” into ACA-appropriate information. Improper handling of this process tends to cause stressful, time-consuming problems later down the line. Avoid these issues with some simple knowledge on the three main components of data gathering—recognizing what data is needed, fitting it to the ACA, and maintaining it for when reporting season rolls around.
Recognizing the correct data isn’t always easy
Figuring out what data to get and where to get it is crucial, particularly because your source data is the only way to prove compliance in the case of an audit. And while most of the information needed for the ACA is standard in all tax forms—employee name, social security number, address, etc.—the ACA also requires some other data points that employers may not have had to previously consider.
Whether and when an offer of health coverage was made, for example, is necessary to complete the forms, even if an employee did not accept the offer. What this offer encompasses must also be provided, including whether it provides dependent or spousal coverage (the option to report spousal or conditional spousal coverage is new this year).
Employers must also be able to estimate an employee’s income, so they can figure out if a plan is “affordable” by the ACA’s definition. This is often done by assessing the employee’s W-2 wages, or calculated based on their rate of pay. If all else fails, using the federal poverty rate can serve as an acceptable alternative, although this may become more expensive in the long run since it assumes your employees are all low-income earners.
Interpreting the ACA when it feels like another language
While most employers find the information they need from their payroll or benefits data, applying it in ACA terms is an entirely different beast. The best example of this is employee status—whether an employee is considered full-time, part-time, or seasonal. While employers can easily find an employee’s job status with other payroll information, it may not fit neatly into the ACA’s three designations. Payroll may also use a wider range of descriptors to organize a job status, such as per diem or stipend, requiring employers to dig into whether a tracked employee has over or under 30 hours of service a week on average—and is therefore ACA full-time or part-time.
Data needs to be updated, renewed, and reviewed
Of course, data continues to pile up, and even if it’s in good shape in June, it could be a mess again by December. As employees come and go and health care plans change, continue to maintain the data you need. In some cases, employers neglect to update their source data with a termination date or change in status, leading to skewed data later down the line. This creates challenges as employers begin to process their employees’ 1095-C forms. Improper data maintenance would lead to inconsistent results, which then have to be cleaned up by retroactively fixing and double-checking the source data.
Termination dates and offers of health care coverage (particularly offers that were declined) are most likely to fall prey to poor data maintenance. Take particular care when documenting this information, and make sure your source data holds the same information as the forms you are filing. If you don’t know who is responsible for this, find out—many employers tend to shuffle around who is in charge of the information needed for the ACA since it’s a benefits issue, a tax issue, and a human resources issue all rolled into one.
It sounds simple, but it still needs doing
While this may sound straightforward, lack of knowledge tends to be the biggest roadblock when it comes to data gathering for ACA compliance. Being aware of what information to collect, where to find it, and how to use it are key steps to understanding the compliance process and completing it with the least amount of hassle. Just being made aware of this basic information and what it means can help set some employers on the right track, and provide security in the case of an audit.