Looking for an ACA compliance solution? Make sure it checks these boxes first

Since being signed into law eight years ago, the Affordable Care Act (ACA) has undergone many stops, starts, and changes. No two years have been the same, making keeping up with compliance even more challenging. ACA requirements are complex, and the cost of mistakes can be high.

Many payroll providers, benefits administrators, tax specialists, and HCM companies now offer solutions to automate the reporting process and eliminate the risk of human error, but not all ACA reporting and compliance solutions are created equal. For applicable large employers who haven’t yet invested in a solution, or may be looking for a new one, we’ve identified seven important capabilities to look for.

The ACA reporting and compliance solution checklist

  1. Covers tricky aspects of reporting.Tax forms are typically complex in nature and that’s no exception for the 1094-C and 1095-C forms. In particular, employers often struggle with lines 14 and 16 of Form 1095-C because there are many combinations of indicator codes that can be reported. An ACA solution should be able to leverage existing payroll and other benefits data to identify the appropriate indicator codes and automatically populate them on the form. The accuracy of these codes is critical to successful ACA compliance.

  2. Assists with ongoing management and tracking of employee data. ACA compliance should be a year-round practice to ensure you’re offering the right health coverage to the right employees to be in compliance. On a regular basis, an ACA solution should track and identify which employees are ACA full-time and, according to the law, must be offered coverage to avoid a penalty. A comprehensive solution will go a step further and check the affordability safe harbors to determine what plans are deemed affordable.

  3. Produces fully auditable forms. The IRS has demonstrated it’s serious about enforcing the ACA, and issuing penalty letters to employers found to be in violation of ACA requirements. To refute a potential penalty, employers need documentation proving they know which employees are and are not ACA full-time, they’ve offered health care coverage to employees who are ACA full-time, and that the coverage was affordable and met minimum value coverage requirements. Look for a solution that aggregates payroll and benefits information and saves all supporting data used to populate a 1095-C form in the case of an IRS penalty or audit. The solution should also be able to determine if a clerical mistake was submitted, so employers can easily correct the necessary forms and share them, along with supporting documentation, with the IRS.

  4. Syncs with other business reporting systems. Manual data entry is one of the most time-consuming and error-prone aspects of the ACA reporting process. Your reporting solution should integrate with other systems that manage employee and company information, such as payroll or a Human Resource Information System (HRIS). Whether the ACA solution communicates and accepts information directly from these systems, or if it simply provides the ability to upload reports from other software, it should provide a seamless mechanism to share existing employee data across platforms and eliminate the need for reentry.

  5. Provides guidance and information to aid in the complex e-filing and correction process. The e-filing process can be difficult and cumbersome with deadlines looming. Often in the e-filing process errors are identified by the IRS that require correction to finalize e-filing. Your ACA reporting solution should use analytics and business logic to assist in the error correction process, and also maintain documentation of your compliance efforts.  A more advanced solution should help you identify errors and correct errors prior to e-filing. 

  6. Handles complex business structures. Large businesses with multiple locations under one employee identification number (EIN), or those with multiple locations with different EINs that share common ownership, are even more susceptible to errors during the reporting process. If your business falls into one of these categories, look for an ACA reporting solution that can accurately track employees across locations, aggregate multiple EINs, and manage varying pay rates for employees in different roles.

  7. Changes with the times. ACA health care requirements are constantly changing, so make sure your solution provider communicates important information about ACA compliance regularly and updates their software as the regulation evolves. At the same time, the solution should be flexible and scalable to meet individual client needs and expectations.

Ultimately, the right ACA reporting and compliance solution should alleviate the burden for your staff who’s responsible for reporting, and give you the peace of mind that your organization is fully compliant and safe from steep penalties. Before you make any investment, run through this checklist and make sure the solution checks each of these boxes.