11 Reasons Not to Use Your HRIS or Payroll Software for ACA Reporting
When it comes to preparing for the Large Employer Mandate in the Affordable Care Act (ACA), many companies rely on either their payroll software vendor to take care of it. After countless implementation calls with our ACA clients, it has become painfully clear that payroll vendors are simply not telling their clients the reality of the situation with the Affordable Care Act.
The IRS updated their Internal Revenue Manual (IRM) to include 1095-C and 1094-C compliance as a part of their general audit rules, meaning ACA compliance is officially a part of the “Required Filing Check”.
11 ACA issues often overlooked or ignored by your HRIS and payroll vendors
Your data is incomplete or inaccurate.
Accuracy in hours worked just isn’t something you’ve been focused on tracking. Until now, the only focus of your payroll software vendor analysts has been to pay your employees the correct amount of money, and to hold back the correct amount for taxes, medical deductions, etc. However, when it comes to ACA reporting, accuracy in hours worked is a vital part of the overall picture.
And to be clear: scheduled hours is not “actual hours” in the eyes of the IRS.
Last year’s hours still count.
Unless you have a non-calendar benefits year, your payroll data from October, November, and December of the previous year will be needed to accurately track benefits eligibility for ACA. This is an important point when converting to a new HRIS/Payroll software.
Your payroll software vendor can’t certify the accuracy of your look-back period.
If you do not track the three types of federally protected unpaid leave of absence that are critical to your data tracking while performing a look back, your results can’t be certified as accurate, especially by your HRIS/payroll software vendor.
They don’t know which ACA category your employees fall under.
The ACA has different rules for various categories of employees, and the categories can be vast and numerous. Among these are:
- Full Time
- Part Time
- Variable Hour
- Seasonal Employees
- Seasonal Workers
- Bona Fide Volunteers
- Adjunct Professors
- Airline Pilots
- Commissioned Sales People
- Student Workers
HRIS and payroll vendors are not experts at knowing the differences between these types of employees and how each impacts healthcare benefits offerings, eligibility, and affordability.
IRS 6055 and 6056 reporting requires more data than HRIS and payroll software vendors are prepared to capture.
There are data requirements that aren’t normally captured or considered within payroll systems, and failure to maintain a full audit trail or not tracking changes month-by-month mean 6055 and 6056 data reporting will likely be impossible. In addition, the IRS in 2018 introduced new requirements on how to print and file Dependent first, middle, and last names; they are required to be stored in distinct and separate fields.
They’re not prepared to help you assess affordability on union or collective-bargaining plans.
Affordability rules for guaranteed benefit payments to unions are very complicated and require a level of analysis that wasn’t previously required and simply isn’t tracked. A payroll vendor just isn’t equipped to deal with these changes. In addition, handing out transition relief for a union plan is only allowed if you certify the union is offering coverage that is affordable and meets ACA requirements.
Incomplete data means your payroll software vendor can’t use 2 of the 3 affordability safe harbors.
Without knowing an employee’s exact work location, lowest self-only monthly plan for each individual employee, or day-by-day history of hourly rates or salary, it’s impossible to use the Federal Poverty Level or Rate of Pay safe harbor appropriately.
University clients will be the last to be compliant and first to be audited.
The ACA rules for school districts and universities are very complex. The amount of rigor required by payroll analysts is catching everyone off guard and creates a perfect environment for regulatory mistakes, such as:
- Adjunct professors needed to be tested in during the prior school year to determine an hours credited rate.
- Student workers need their hours tracked based on whether work is under a federal grant or not.
- Coaches working on a stipend still need their hours tracked.
So far, over 33,000 penalty letters were sent to employers for non-offers during the 2015 tax year. Universities and other educational entities were included in this audit, facing stiff penalties for non-compliance.
They may help you assume or estimate the number of hours for an employee – but that’s not actually legal.
Part time office assistants may only be scheduled for 25 hours, but if you know they are regularly working more (or fewer) hours you can’t make assumptions for a standard number each month and squeak by using the monthly or weekly look back/measurement period. It’s against the law.
HRIS and payroll software vendors haven’t been investing in their software.
It’s no surprise that the political climate and calls to repeal ACA means HRIS and payroll vendors stopped adding new technology around the time President Trump was elected. Two years later, there is functionality missing to correctly handle ACA such as:
- Letter 226J research and response generation
- Handling corrections and refiling across multiple tax years
- Updated Dependent name requirements for 2018-forward
- Updated IRS Internal Revenue Manual (IRM) audit procedures
ACA compliance is not the primary function of HRIS and payroll software.
If your HRIS and payroll vendor offer low-cost reporting, or bundle it with the software, they’re expecting you to be the expert. They will expect you to understand every nuance of the law, and you’ll be the one held accountable and responsible for the results. The ACA law is very clear: third parties are not responsible for mistakes. Don’t put yourself in harm’s way by dealing with someone who is less than an ACA expert.
Learn more about how HRIS and payroll software are deficient when it comes to ACA reporting: Ebook: Top 3 Things Missing From Your HRIS and Payroll ACA Solutions
How to shift to more accurate ACA reporting
The easiest to achieve more accurate ACA reporting is to work with a specialized ACA vendor that offers robust, standalone software and expert services to keep you compliant. You should also verify that your vendor checks off all the key ingredients to mitigate your ACA penalty risks. Check out our ACA Checklist for more details on how to evaluate a vendor.
We offer a full-service ACA Compliance & Reporting solution and specialize in large, complex businesses. Our software was created to manage ACA reporting and our experts are focused on the ACA. Learn More About our ACA Compliance & Reporting Solution.
Categorized in: ACA