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Why is an ACA Solution the Ultimate Tool in a Broker’s Toolbox?
Lasenda Barrois • September 14, 2022
An employer may look to a broker for advice when they receive a 226-J Penalty Letter from the IRS, and on how to respond to them due to the financial burden it may cause them.
Keeping compliant with the Affordable Care Act (ACA) is a complex process for employers, which is why they often turn to their brokers or advisors for assistance to ensure that they understand their obligations under the law. Even though Benefits Brokers many have educated their Applicable Large Employers (ALEs) clients, many are consistently receiving penalty letters for each reporting year that they didn’t comply with ACA rules. Brokers should consider the value of offering an ACA solution to their clients by teaming up with an ACA partner that not only yields benefit for the broker but also for the client.
If you are a broker or advisor that isn’t offering an ACA solution to your clients, the client may choose an ACA solution that may not suit their situation. Alternatively, clients may fail to retain the services of a compliance company which might put them at risk of non-compliance. Should this occur, the client could place blame on their broker or advisor which may result in losing their business to a competitor.
Offering an ACA solution will increase the likelihood of retaining that client. For instance, a broker or advisor who only provides one product or service is less likely to retain clients. If a broker or advisor offers various products or services, then they create more value and can retain them for longer periods of time.
ACA Light or Free ACA Services that are fully integrated may create more issues than they are worth.
Many ALEs may utilize fully integrated services that are available to them from their Payroll or HRIS platforms to help them with their compliance needs. Many find that they are in non-compliance once they receive a 226J letter from the IRS, and it can be quite costly.
These types of solutions are limited, and this is a huge compliance risk to those employers who utilize them. These free solutions offer few features and functionality, which leaves employers not knowing how to populate codes on forms, or realize they do not know how to set up a measurement period. Does the client know what IRS Calculation Method they are using to track employees? Or which IRS Calculation method they should be using? If the client doesn’t know the answer to either of these questions, then they may be in non-compliance.
The absolute worst letter that an ALE can receive is a penalty letter from the IRS. Most employers do not know how to respond to these types of letters or don’t know why or how their data is incorrect or know why they are receiving the letter. Often, employers believe that their data is correct, but it is not. This is when the employer will realize that the “free” ACA service that they are using is not going to cut it in the end.
Having the Golden Answer that pays in the end.
The first thing that an employer will do is contact their broker or adviser and ask how they can fix this and prevent penalty letters. This is when it is in your best interest to have a stand-alone compliance solution at your disposal. When your client presents you with this problem, you will have the tool ready to help them solve it.
The right compliance solution uses business logic to populate 1095 forms based on the ACA. The solution should double-check the data to ensure that the coding is correct and makes sense, use the objective data that can be edited to support form population and subsequent reporting, and be auditable.
With the 2022 ACA reporting season right around the corner, this is the best time for employers to start gathering their data and reviewing it to ensure they are complying. Employers are more than likely going to turn to you, their trusted advisor, to ensure that they are complying according to ACA regulations. Now is the best time for you to provide your clients with the right tools to get the job done correctly the first time around. A quality ACA compliance solution is the best starting point for your clients.
Author: Lasenda Barrois
SyncStream Solutions, Partner Manager/HR
Have Questions or Need More Information?
Join us to ensure you’re avoiding common mistakes that could lead to costly penalties. With the ACA filing deadline on March 31, 2025, fast approaching, this is your chance to ensure your reporting is error-free and penalty-proof. Join us as our Director of ACA Services, Ashley Pope, disusses how to get ahead of the curve and avoid the pitfalls that many organizations face during filing season.
Join us as SyncStream kicks off 2025 ACA Reporting year with going back to the beginning. This webinar is designed to provide a beginner-friendly approach that revisits the fundamentals of ACA Reporting. Whether you are new to ACA, seeking a refresher, or feeling bewildered by ACA regulations, this webinar is tailored just for you!
As part of the Tax Cuts and Jobs Act (TCJA), the Affordable Care Act’s (ACA) individual mandate penalty was repealed effective January 1, 2019; however, the TCJA did not repeal the employer mandate nor its reporting requirements. Employers should be prepared to respond to IRS Employer Shared Responsibility Provision (ESRP) penalty letters and continue to prepare for 2024 reporting, which will occur in the first quarter of 2025.
An employer may look to a broker for advice when they receive a 226-J Penalty Letter from the IRS, and on how to respond to them due to the financial burden it may cause them.
Keeping compliant with the Affordable Care Act (ACA) is a complex process for employers, which is why they often turn to their brokers or advisors for assistance to ensure that they understand their obligations under the law. Even though Benefits Brokers many have educated their Applicable Large Employers (ALEs) clients, many are consistently receiving penalty letters for each reporting year that they didn’t comply with ACA rules. Brokers should consider the value of offering an ACA solution to their clients by teaming up with an ACA partner that not only yields benefit for the broker but also for the client.
If you are a broker or advisor that isn’t offering an ACA solution to your clients, the client may choose an ACA solution that may not suit their situation. Alternatively, clients may fail to retain the services of a compliance company which might put them at risk of non-compliance. Should this occur, the client could place blame on their broker or advisor which may result in losing their business to a competitor.
Offering an ACA solution will increase the likelihood of retaining that client. For instance, a broker or advisor who only provides one product or service is less likely to retain clients. If a broker or advisor offers various products or services, then they create more value and can retain them for longer periods of time.
ACA Light or Free ACA Services that are fully integrated may create more issues than they are worth.
Many ALEs may utilize fully integrated services that are available to them from their Payroll or HRIS platforms to help them with their compliance needs. Many find that they are in non-compliance once they receive a 226J letter from the IRS, and it can be quite costly.
These types of solutions are limited, and this is a huge compliance risk to those employers who utilize them. These free solutions offer few features and functionality, which leaves employers not knowing how to populate codes on forms, or realize they do not know how to set up a measurement period. Does the client know what IRS Calculation Method they are using to track employees? Or which IRS Calculation method they should be using? If the client doesn’t know the answer to either of these questions, then they may be in non-compliance.
The absolute worst letter that an ALE can receive is a penalty letter from the IRS. Most employers do not know how to respond to these types of letters or don’t know why or how their data is incorrect or know why they are receiving the letter. Often, employers believe that their data is correct, but it is not. This is when the employer will realize that the “free” ACA service that they are using is not going to cut it in the end.
Having the Golden Answer that pays in the end.
The first thing that an employer will do is contact their broker or adviser and ask how they can fix this and prevent penalty letters. This is when it is in your best interest to have a stand-alone compliance solution at your disposal. When your client presents you with this problem, you will have the tool ready to help them solve it.
The right compliance solution uses business logic to populate 1095 forms based on the ACA. The solution should double-check the data to ensure that the coding is correct and makes sense, use the objective data that can be edited to support form population and subsequent reporting, and be auditable.
With the 2022 ACA reporting season right around the corner, this is the best time for employers to start gathering their data and reviewing it to ensure they are complying. Employers are more than likely going to turn to you, their trusted advisor, to ensure that they are complying according to ACA regulations. Now is the best time for you to provide your clients with the right tools to get the job done correctly the first time around. A quality ACA compliance solution is the best starting point for your clients.
Author: Lasenda Barrois
SyncStream Solutions, Partner Manager/HR
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