ACA Compliance is Hot This Summer
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The words “Summer” and “vacation” are often paired together. Applicable Large Employers should note that even though their ACA filing responsibilities have likely been satisfied due to the deadlines ending in April, the summer is more than a vacation period, it’s also a critical time for addressing ACA compliance.
Below is a checklist of items for which you will want to review this summer. Failure to do so could result in IRS Letter 226J penalty assessments, which the agency is now issuing for the 2017 tax year.
Perform Monthly Checks
ACA compliance is a monthly process. Period. Review all of your 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.
Perform An ACA Penalty Risk Assessment
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 to look for, consider using outside experts to conduct the audit. Some companies will conduct these audits at no cost to your organization. Catching any mistakes or problems with data in your past compliance 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 before a penalty assessment may be issued to your organization.
Seasonal Employees
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 the same time every year. If your organization uses the Look-Back Measurement Method to determine benefits eligibility for your workforce, the same method should be implemented 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.
Seasonal Workers
This may sound redundant, but the IRS treats seasonal employment in two different contexts. Seasonal employees are to be measured and determined if they are full-time. Seasonal workers, on the other hand, are used in the context of determining if an organization is an Applicable Large Employer (ALE), which is an employer that has 50 or more full-time or full-time equivalent employees. Learn more about the differences here.
Surge in Hours of Service
Often times, 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. These stability periods are based 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.
Check Your 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.
Check Your 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 to Extend 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 to be 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! You’ll be kicking yourself come filing season if you do.
The IRS is issuing penalties to Applicable Large Employers, (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, that are required to offer Minimum Essential Coverage to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value and is Affordable for the employee or be subject to IRS 4980H penalties. Currently, the agency is issuing Letters 226J for the 2017 tax year. If your organization has already received a penalty notice, you can respond with this guide.
To learn more about ACA compliance for the 2019 tax year, click here.
For ACA reporting deadlines in 2020 for the 2019 tax year, organizations should review this link for important dates and requirements.
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