The words “summer” and “vacation” often go together. Applicable Large Employers (ALEs) should note that even though their ACA filing responsibilities have likely been satisfied due to the deadlines in April, the summer is more than a time for vacation, it’s also a critical time for maintaining ACA compliance processes.
Below are a number of items you should give special attention to this summer. With the IRS making progress on its backlog, and more IRS Letter 226J penalty assessments on the way now is the time to ensure your ACA compliance processes are tight-nit.
Implement a monthly process
ACA compliance is best when it’s performed on a monthly basis. Best practices recommend reviewing all documents that substantiate offers of coverage as well as benefits information. By incorporating a monthly ACA compliance process, you are in a better position to cross-reference the information in the IRS’ Letter 226J with your own records.
This will save your organization time and money, in addition to getting you set up for responding to the notice in a timely manner. With the agency now enforcing a reduced amount of time for an extension to an organization to respond to Letter 226J, time will be of the essence.
In addition, a monthly process can assist in reducing penalty risk altogether. The reason for this is that you can adequately prepare and extend offers of coverage to ACA full-time employees on time.
Understand seasonal employees and seasonal workers
Hiring seasonal employees for the summer is something many organizations do. By IRS definition, seasonal employees work customarily for no more than six months on an annual basis and, by its nature, should begin at the same time every year.
If your organization uses the Look-Back Measurement Method to determine benefits eligibility for your workforce, then you should use it when accounting for your seasonal employees.
These seasonal employees will not require an offer of healthcare coverage until they reach their initial stability period and average at least 130 hours of service per month during their measurement period.
Now that you know what seasonal employees are, it’s critical to understand the difference between them and season workers. The IRS treats seasonal employment in two different contexts.
Seasonal employees are measured for determining ACA full-time status. Seasonal workers, on the other hand, are used in the context of determining if an organization is an ALE, which is an employer that has 50 or more full-time or full-time equivalent employees.
Monitor hours of service
Oftentimes, employers assume an employee’s employment classification will change depending on the hours of service they provide. This is partially true. If you are using the Look-Back Measurement Method, employment classifications for variable-hour employees are locked in for their initial or standard stability periods.
These periods can range in length and rely on the preceding initial or standard measurement period. If an employee starts working full-time hours during the summer months, his or her status as full-time will not be reflected until the following stability period. Make sure you monitor hours of service closely as this will help in accurately identifying worker classifications.
Check time and attendance records
The summer is a time when many people take time off from work. With employees covering shifts, taking off for long periods of time, and seasonal employees coming on board, a lot can go wrong. Double-check your time and attendance records for accuracy. These records affect full-time eligibility reporting and errors can lead to some hefty ACA penalties. The quality of the data being stored is critical for managing ACA compliance.
Review employee-level details
With an influx in hiring during the summer, employee counts may get overlooked and may even be entered incorrectly into databases. Make sure employee details are correct.
While reporting deadlines may seem to be in the distant future, it is advisable to always keep accurate records. Misclassification can result in incorrect data being filed with the IRS and trigger expensive ACA penalties. Employers should familiarize themselves with the five dimensions of data quality when validating their employee level details.
Continue extending offers of coverage
Whether your open enrollment is at the beginning, middle, or end of the year, full-time employees require offers of coverage outside these periods. Full-time designated employees must receive an offer no later than 90 days from their date of hire.
For variable-hour employees determined full-time, the length of the initial measurement and administration period can significantly extend the deadline to make an offer. As you continue to hire, be mindful of these rules, and do not sleep on extending offers on time.
Get your ACA Vitals score
The summer is a great time to review past ACA information filings. Perform audits on your past 1094-C and 1095-C information filings with the IRS to identify any possible data integrity issues that could trigger a Letter 226J penalty notice. If you are not sure what triggers to watch out for, then you would benefit greatly from getting your ACA Vitals score.
With ACA Vitals, you can identify the risk areas within your organization and subsequently investigate these areas to uncover any mistakes or problems that may result in future IRS penalty assessments.
This review process will ensure that you are not repeating the same mistakes in future information filings with the IRS. And it will provide an opportunity to correct those items with the IRS. To learn more about ACA Vitals, click below:
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.