The Triangle of Trust Is Critical for ACA Compliance [UPDATE]
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3 minute read:
Creating the optimal alignment of data, regulatory expertise and software is critical in achieving ACA compliance.
We call this principle the Triangle of TrustSM. This principle has three elements:
Trust in Data
Data, such as Payroll, Time and Attendance, Leave of Absence, Benefits Administration and general HR information, which have both structured and unstructured components, are frequently scattered across various databases and platforms. The data from these disparate silos needs to be aggregated, consolidated and validated into a set of accurate data for use in addressing regulatory compliance for the ACA.
During this aggregation process, there’s a significant chance that crucial bits of information will either be omitted, duplicated, or entered in error. Inaccurate data being used for ACA information filings can result in significant IRS penalty assessments.
Organizations are particularly at risk on this issue given that their data systems are often dated and were not designed to manage the complexities of the ACA.
Trust in Regulatory Expertise
Regulatory expertise is critical to ensure accurate data is applied in appropriate ways, through analytical processes that combines correct interpretation of regulations and laws. Such expertise in regulatory affairs will allow software to effectively address regulatory compliance and business intelligence.
Understanding how to interpret and segment data so that it will answer the requisite questions of your analysis as processed through software is critical to getting the best, most accurate interpretations from the data for a successful ACA filing. Given the severity of the financial risk of IRS penalties for ACA non-compliance, having ACA regulatory experts readily available is vital to your ACA compliance efforts.
For example, does your organization know the intricacies of the ACA well enough to determine if the data being used will successfully answer questions like these?
What safe harbor and measurement method are being used, and are they being applied correctly?
Are processes in place to make sure the health coverage benefits being offered are consistent with the ACA?
What’s the monthly offer rate percentage?
Do your insurance products help or hurt your ACA compliance efforts?
Trust in Software
Software development is a multidisciplinary effort in software programming, database management, data science, data analysis and regulatory expertise. These experts need to work together to properly develop and program software that will apply the clean data to effectively address regulatory compliance and provide business intelligence. This is critical to obtain accurate outputs that will effectively address IRS information requirements that demonstrate ACA compliance.
The challenge with using do-it-yourself software for ACA compliance is that it won’t tell you if the underlying data contains discrepancies, and it won’t tell you if the inputs combine to comply with the ACA rules. You’re putting a lot of trust in automated software that puts the onus on you to understand the implications of the inputs. Also, if the data is bad, the software may only highlight the errors in the ACA filings. These errors can result in exposure to significant IRS penalty assessments.
Mastery of the Triangle of TrustSM is critical for ACA compliance because failure to comply with the ACA’s Employer Mandate can result in costly penalties from the IRS.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs) (organizations with 50 or more full-time employees and full-time equivalent employees) are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
The IRS is currently issuing Letter 226J penalty assessments to ALEs identified as having failed to comply with the ACA’s Employer Mandate for the 2017 tax year. The IRS also is issuing penalties to ALEs under IRC sections 6721/6722 for failing to distribute form 1095-C schedules to employees and to file Forms 1094-C and 1095-C schedules with the federal tax agency by required deadlines.
Organizations should consider undertaking a cost-free ACA Penalty Risk Assessment performed to learn about their potential exposure and strengthen their ACA compliance and to see how the Triangle of TrustSM may help improve their compliance processes.
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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