The IRS recently released draft forms for companies to report certain employee information under the Affordable Care Act (ACA) and IRS code sections 6065 and 6066.
While these forms are merely drafts and are not intended for filing, they do provide important insight into the reporting obligations of entities that provide minimum essential coverage.
Because these forms are new, it may take the current payroll and benefit system providers a while to prepare.
Employers subject to the provisions of the ACA should consider using a Human Resources Information System (HRIS), which is an electronic system that is used to track and store employee data.
Employers can use the system to easily and efficiently manage things like employee records, payroll and benefit processes.
If a system is not already in place, now may be a good time to begin weighing options and have the necessary discussions to get things moving.
Smart Business spoke with Ron Filice, president and CEO at Filice Insurance, about the upcoming ACA reporting requirements and how an HRIS could help companies stay in compliance.
Who is most affected by the potential new filing requirements under the ACA?
While small employers — those with fewer than 50 full-time equivalent employees — that sponsor a self-insured group health plan will have a filing requirement, it’s large employers that sponsor either insured or self-insured plans that will have the heavier filing burden with the introduction of forms 1094-C and 1095-C.
The deadline for reporting is Feb. 28 — if electronically filed, the deadline is March 31 — of the year following the year in which coverage was provided, beginning in 2016 for the year 2015. Individual employee statements must be provided by Jan. 31.
Because these forms are drafts, instructions are not included and the forms may undergo significant changes before the final versions are released by the end of the year.
Nevertheless, large employers are strongly advised to implement internal systems, such as HRIS, to efficiently track the required employee and benefits information.
How might HRIS help?
Utilizing an HRIS allows HR professionals to seamlessly pull data from employee records and have it automatically inputted into necessary benefit enrollment documentation.
If the system in place has integrated carrier connections, then the documents are simply pushed over to the carriers for immediate processing. Aside from assisting with processing, HRIS systems can also help with tracking employee eligibility.
Why should companies consider implementing an HRIS?
HR processes that aren’t managed using such a system could potentially become an administrative nightmare with the upcoming mandates on large employers through the ACA.
Using a system that is sufficient enough to support the increased compliance requirements will ensure that employers are effectively managing their responsibilities and their workforce.
For employers that have a large number of variable hour employees, certain systems have developed the functionality to manage look-back periods and full-time equivalency calculations, taking quite a bit of manual Excel calculation off of the employer’s plate.
What are the penalties for noncompliance?
Failing to file or providing incorrect information to the IRS and failing to provide employee statements can result in a penalty of $100 per statement, not to exceed $1.5 million.
For the first round of reporting due in 2016 only, the IRS will waive such penalties so long as an employer can demonstrate a ‘good faith effort’ to file correctly. There will be no waiver of penalty for failure to file altogether.
Employers should take seriously their reporting obligations under the ACA. The requirements and potential penalties are very real and present, so employers shouldn’t delay putting in place an effective HRIS.
While 2015 will undoubtedly present challenges in terms of ACA compliance and reporting methods, a quality HRIS will prove invaluable and will make compliance infinitely more manageable. ●
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