By - September 20, 2016

National Law Review: Government Projects Employer Mandate Penalties of $228 Billion Over Next 10 Years

Employer Mandate Working with Data

In an article published this week, The National Law Review clearly and starkly describes how employers must ensure accuracy and completeness of ACA reporting data in order to avoid billions of dollars in fines. There will be no “good faith” efforts considered for the employer mandate in the 2016 reporting year. The message is clear: penalties and fines will be levied on organizations that fail to carefully attend to the detailed steps, and those fines will be significant.

This no-nonsense checklist explains ten important factors employers should consider in preparation for 2016 ACA reporting (filed in 2017), all of which align with Tango’s fully-outsourced ACA compliance solution. We recommend that employers with over 50 full-time employees should take the time to read the entire article and prepare their organization in order to mitigate risk – Tango provides this level of service for all our clients.

10 factors to consider for ACA reporting

  1. Understand The Big Data Environment. The IRS is using big data analytics to find contradictions within data across multiple forms – contradictions that will lead to audits and fines.
    “…the government projects employer mandate penalties of $228 billion. Thus, there is clear anticipation that revenue will be generated and violations will be ascertained through the information reporting filings.”
  2. Ensure Proper Worker Classifications. This covers more than just identifying full-time versus part-time. For the 2016 reporting year the eligibility threshold has gone from 70% to 95%, placing an additional burden on employers. Relationships with staffing firms and other alternative arrangements further complicate the process of properly classifying employees.
  3. Monitor changes in the applicable guidance. The IRS released draft forms and instructions for filing that included a number of significant changes to codes, some of which could lead to penalties for the employer. There are also proposed regulations regarding how coverage opt-outs should be handled when determining affordability, and how to handle reporting on employees potentially covered by multiple plans offering minimum essential coverage. Familiarity with these changes is vital, but because these are still draft guidelines and proposed regulations, employers will need to be vigilant in staying up-to-date on the information.
  4. Ensure Accurate Names and Social Security Numbers. The article outlines a number of steps that employers should take to ensure that the employee and dependent data is captured accurately and completely. However, it’s not enough to just take the steps outlined – employers will need to systematically track and record steps taken, responses received, and changes made to employee data.
  5. Corrected Returns. The author notes that while employers may be getting ready for 2017 filings, many are still addressing the corrections process for the 2015 forms: “Correcting errors is part of the good faith effort to file accurate and complete information returns.” For those who may have struggled with the 2015 reporting process, showing “good faith” means continuing to try to provide as much accurate information as possible.
  6. Record Retention. An extensive list of employee documentation is outlined in the article, and it’s recommended that employers gather all of this data to provide proof for audits or other issues. Employers should also have a documented process in place for gathering, tracking, and recording the data.
  7. Marketplace Notice and IRS Penalty Notice. For Marketplace Notices issued regarding employees who received a subsidy, “It is especially important for large employers to check records to determine if this employee was offered qualifying coverage, that the employee was properly classified and then to determine if it is necessary to challenge…because this could be a trigger for later receipt of an IRS penalty notice.” The article goes on to explain that employers should prepare to clarify their position and should have an approach for reviewing and responding to subsidy notices.
  8. Corporate Transactions. In terms of mergers and acquisitions, not only should the acquiring organization be aware of the method of reporting used by the organization being acquired, it’s also important to review that reporting to determine if there was inaccurate or incomplete information. Potential penalties could even be factored into purchase prices. “A best practice is to perform a 1095-C and 1094-C audit during the due diligence process.”
  9. Fiduciary Responsibility and Governance. Since health and welfare plans are subject to ERISA, care should be taken to ensure that they are in compliance. Employers are urged to enact enhanced fiduciary governance procedures.
  10. Establish an ACA Information Reporting Team. As the author notes, “ACA compliance has many facets, and information reporting is a complex requirement.” Data collection and integrity, quality control, data privacy, and accuracy auditing are all items that this team should handle to determine the cause of the errors and address them. Without this level of attentiveness, fines are an inescapable outcome.

What to do?

Partnering with an ACA expert like Tango Health will relieve this pressure on your organization. Our full-service solution tracks these steps nearly identically, providing turnkey support including:

  • An ACA-certified partner who will manage your program and provide regular communication
  • Meticulous data collection, analysis and tracking
  • Proactive monitoring and alerts regarding updates and changes in the guidelines
  • Remediation to ensure your organization achieves ACA compliance success

Learn more about our ACA Compliance and Reporting Solution.


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