Requirements:
In order to complete ACA reporting and compliance reviews you must have the Clarity Human Resources Module. ACA regulations are based on a combination of Payroll and Human Resource information and therefore access to both modules is necessary.
Restrictions:
While Clarity can host multiple companies within its framework and with a single login you are able to access all of these companies Clarity maintains each of these companies independent of each other in separate database files. Therefore Clarity cannot amalgamate these records together to produce an ALE Aggregated Group.
Setup:
Setup of Clarity for ACA reporting and compliance capability can be accomplished in a few simple steps. While these steps are not difficult it is important that they are followed appropriately or you reporting will be inaccurate. Setup is broken into three key areas consisting of Company definitions, Employee definitions and Benefit definitions.
Company Definitions:
There are three sets of parameters you must define under Configuration > Company > Company Edit [Affordable Care Act] tab.
Designated Government Entity Indicator: If your company is a government employer you may designate another government entity to report coverage of your employees. This entity would be responsible for reporting the employee’s coverage under the self-insured group plan your company is providing.
When this parameter is selected the self-insured employer indicator should also be checked.
When you select this option you must also enter the details of the designated entity including the name, EIN, address and contact information. This information will be reported on your 1094-C
Self-Insured Employer Indicator: Check this indicator if your company is providing their own insured benefit plan not part of a government plan, insured plan or coverage offered in the small or large group markets within the state, or a grandfathered group plan.
Certification of Eligibility:[i]
This parameter consists of four (4) options, your company will typically be selecting one (1) of these options however, on some occasions, and more than one option may be selected.
Qualifying Offer Method: A MEC providing minimum value to one or more full-time employees for all calendar months at an employee only cost to the employee not exceeding 9.5% of the single federal proverty line, a value of $11,760 or cost of $1,108.65 to the employee for the year[ii].
Qualifying Offer Method Transition Relief: Similar to Qualifying Offer method except employee not offered for all month’s employee was full time. Such as month of hire or applicable assessment (probation) period.
Section 4980H Transition Relief: c
98% Offer Method: d
Benefit Definitions:
In order to do ACA reporting you must define Benefit Plans in the Human Resources module. Creation of benefit plans in Clarity consists of four (4) definitions, three (3) of which are required. The setups for benefits can be found in Setup> HR Settings > Benefits
Benefit Plan Carrier: Here you will enter the information for the company that is carrying your benefit plan, otherwise known as the provider of the plan. If your company is using a brokerage firm to obtain your benefit plan than the information entered here should be the benefit company the firm associated you with, not the brokerage firm’s information.
Benefit Administrators: These are optional to setup, and some companies will have no use for them at all. When defining a benefit administrator you can define them as either an internal administrator or third party administrator. Internal administrators should be defined when there are multiple people working in your HR department or if the individual who manages your HR information is not also the primary contact for the benefit plans changes, agreements, negotiations, etc.
For example:
- Company Watching foods is a small business, the owner of the company handles the payroll, HR and benefit administration with the provider or broker directly. In this case no internal administrator is necessary.
- Company Breathing International is a large company in multiple states. The Human Resource department consists of three (3) employees, the head of HR has delegated one of the HR employees to manage reporting to the provider, negotiating, filling of claims, reporting changes to the employees, managing enrollments, etc. This person should be recorded as a third party administrator so it’s known who questions internally should be addressed to.
Third Party administrators would be individuals outside your company who are responsible for managing, reporting, and/or negotiating the terms of your benefit plans. These individuals would typically be the brokerage firm that you used to acquire and maintain your benefit plans with. If you did not use a brokerage firm you most likely won’t have a need for a third party administrator.
Benefit Plan Group: Benefit plan groups provide the ability to group benefit plans together. This allows for reporting of costs for an entire group of benefit plans that may all be associated to the same policy or agreement with a provider. For example a benefit provider under a single agreement policy with the company may be providing a health plan, dental plan and retirement pension plan. The employees however may have the option to opt in and out of one or all of the plans that are part of that policy. The benefit plan groups allow you to define multiple plans and link them to the same group for reporting purposes.
For ACA reporting you must define an benefit plan group, when you create a benefit plan group you will also set the Origin of the policy which can be one of the following options:
A) Small Business Health Options Program (SHOP)
B) Employer-sponsored coverage.
C) Government-sponsored program.
D) Individual market insurance.
E) Multiemployer plan.
F) Miscellaneous minimum essential coverage.
Benefit Plan: Define a benefit plan in the system and assign it to your benefit plan group. You should have two benefit plans created in your system. Give the first plan a name and code so you can identify it as an assessment period plan that the employee belongs to and the second plan the normal description for the day-to-day plan.
In the benefit plan you should set the type to Health, as ACA benefit plans are health plans. The policy number is also required, this is the policy number provided to you by the benefit plan provider. Enter the start date as to when you entered into the agreement with the benefit plan provider and select the appropriate carrier, internal and third party administrators.
The benefit plan status should be set as “Active”, plans with a inactive or status cannot be assigned to employees in your system. If you are entering the details of a new benefit plan agreement with a future dated start date keep the status active so you can assign it to the employees with the future dated reference. The plan will not come into effect until that date.
On the [Detail 1] Tab, at the bottom, you must select that this plan is an Applicable ACA Plan, only benefit plans flagged as such will appear in your ACA compliance reports and be reported to the 1095 and 1094 respectively.
For the 1st benefit plan that is for new hire employees during their assessment period (or first month of employment) enter the plans Offer of Coverage as 1H, for the second plan enter the appropriate Offer of Coverage option that your company is using.
Usage:
Usage is very simple in the system and restricted to two areas of the software. Under employeesàGeneral Information à[Payroll] tab you have a field for the ACA Employment type, this must be selected in order for the system to determine if the employee is full time, full-time equivalent or a different type. For ACA reporting only employees of full time or full time equivalent status are counted in your employee counts. Changes to this value will populate the employee history in current company records. These records are date-stamped with the date of the change and the new value. The ACA compliance reporting will check the Human ResourcesàEmployee History in Current Company section to determine for each month in a year what the employees ACA employment status type was. Therefore, if you make a change to the ACA Employment type of the employee and want the effective date of the change to be different from the current date than after making the change you must go to the above mentioned section and change the date appropriately.
The second area of maintenance for the employee is under Human ResourcesàBenefit Enrollment. Here is where you record that the employee is enrolled into a benefit plan and which one OR that they employee has opted out/waived the plan. Depending on the employee and scenario you may setup the benefit enrollment differently, see the following scenarios.
How do I record my employees benefit enrollment?
Step 1. First, is/was the employee in a probation period this year where the benefit plan did not start for a 3, 4, or other month term?
Yes: If the answer is yes, than add a benefit plan with the start date as the employees start date, the end date should be the end of the month in which the employees probation period ends and they should be assigned to the benefit plan for new hires, this is the one with the Offer of Coverage value set to 1H. This is important because the employee is not entitled to the plan yet and therefore is in an applicable assessment period. While the employee may be full time, they are not used in your employee counts until they have completed that assessment or probation period.
No: If the answer is no proceed to step 2.
Step 2. Did the employee start on the first day of the month, or was the benefit plans enrollment back-dated to the first of the month?
Yes: If the answer is yes, than add the benefit plan with the start date as the first of the first day in the month of hire. Even in scenarios where the employees hire date may have been later, like the 12th for example, If you granted immediate access to the benefit for the employee including the days prior to the their employment than add the regular benefit plan, not the 1H plan, to the employee
No: If the answer is no, than add the benefit plan with the employees start date as the plans start date and the end date as the last day of the month, select the plan with the Offer of Coverage value set to 1H. Also add the benefit plan with your normal offer of coverage selected, set the start date to be the first of the following month and the end date, if applicable.
My Employee opted out of the benefit plan enrollment, what do I do?
Record the benefit enrollment as if they enrolled appropriately with the following differences.
- Enter the end date of the regular enrollment plan as the last day of a month that includes the employee’s open enrollment period. This is the period in which the employee has the opportunity to enroll into the plans offered by the company. If you allow employees to enroll at any time into the plan leave the end date blank.
- Enter the Waiver date as the first day of the month the employee opted out of the plan
- Enter the appropriate reason as to why they opted out of the plan.
How do I record my employees benefit enrollment for the month they left the company?
If the employee has left the company, voluntarily or not, and the benefit plan would have covered every day of the month had they stayed employed enter the end date of the benefit plan as the last day of the month. The employee has coverage for the entire month and while their termination may not be the last day of a month their coverage is still for the whole of the month.
Analysis:
Under Human ResourcesàAffordable Care Act you can review your employee and company ACA compliance information quickly and easily.
The employee screen is broken into two section, on the left is the employee’s monthly enrollment details. Here you will see a status reference so you’re able to see if the individual was employed in the month and were they full time. Any months the employee had no benefit enrollment details assigned to their profile the system will report that month as 1H, or no offer of coverage, so it’s important that you report all months the employee was offered coverage, including the months the employee opted out of coverage. The safe harbour code will show 2A for any month the employee was not employed, 2B if they were not registered as a full time employee but had benefits assigned to them and 2D for any month where the benefit enrollments start or end date didn’t not cover every day of the month.
With the benefit enrollment for the employee assigned, their minimum share will be displayed for your information, note that while an employee may have dependents enrolled into the benefit plan affordability is determined on the employee only share only.
You’ll further see the employee’s coverage column as if the employee was or was not covered and for each dependent of the employee you’ll see if that dependent was covered during the listed month as well.
On the right panel you’ll see the employee’s history records, showing any changes to the employee’s employment status or applicable employment type classification during the year. For example, if the employee change from part time to full time or active to termination these status changes are shown for quick reference. Additional all enrolled dependents are shown as well.
Under the Consolidated tab you’ll see the totals for your company. Here you can see for each month the number of employed, full time and full time equivalent employees your company had for each month. You’ll also see how many of the employees were classified as being in a limited assessment period and therefore not counted against your full time employee count for that month. Clarity will show you how many employees were offered the plan and the percentage of those that were offered and considered affordable.
You’ll also see a compliance column. This will show up based on the option you chose for certification of eligibility. If your selection was 98% offer method clarity will show compliance if 98% of the employees were offered coverage and it was affordable. If either Qualifying offer methods were selected the ratio will be checked at 95% and if you selected the 4980H Transition relief option the compliance will be checked at 70%.
Reporting:
ACA reporting requires you to complete a 1094 and a 1095 report, the former being the employers copy with the IRS and the latter being the employees copy you must print and distribute to your covered employees for their own reporting purposes.
Using the ACA Consolidated screen you can see how many Full time and Full time Equivalent employees you had. If the number exceeds 50 than you must complete the 1094-C and 1095-C reports. Always complete the 1095’s first, as these are your employee copies you must print.
After you have completed and printed the appropriate 1095 report you can than proceed to do the 1094 report, selecting the B or C version respectively based on your employee count. This report may be printed and mail filed with the IRS unless you have more than 250 employees, if this is the case you are required to electronically file your reports with the IRS using the Aatrix e-file system.
What is it?
Affordable Care Act, ACA, also known as “Obama Car” is a new regulation for US HR Systems that came into effect in 2014. Companies were provided the opportunity to optionally file the reports in 2014 and required to report for 2015.
ACA is comprised of three (3) parts, firstly it’s a mandate that ever INDIVIDUAL US PERSON must not have health coverage, either their own or covered under another individual such as a parent.
THIS is the principle purpose behind ACA reporting, to be able to show and prove that all individuals have coverage that are required too.
In order to assist people in obtaining coverage, companies have been mandated to provide their employees the appropriate coverage if they employee more than 50 full time employees.
What is Coverage:
While this doesn’t affect us at Paymate in any way of support or implementation, it’s good to know that ACA is HEALTH coverage only, and must cover at least 60% of the expenses a person would incur to receive medical assistance.
The coverage does not include Dental or Vision, strictly health such as hospital visits, casts, lifesaving required medications (not prescriptions such as T3’s or anti-depressants)
Coverage must be affordable:
Companies that have more than 50 full time employees must provide coverage to their staff. This coverage must be considered affordable to their employees, there are three (3) ways to determine affordability:
n Annual W-2 Wages (2F);
- This value is widely contested by companies, as the company cannot determine the wages earned by an employee in other companies, only their own. Therefore while they may “fail” affordability tests themselves they could still “pass” for the individual when you take into consideration his/her’s wages from other companies.
n Federal Poverty line (2G); or
- Poverty lines are not reported until the end of January for the previous year, this means that Clarity can only determine affordability using the previous years figures.
n Monthly Rate of Pay (2H);
- This takes the employees hourly rate of pay * 130 (the number of hours used to determine they are full time for a month).
Affordability cannot exceed 9.5% of the employees’ wages as per the above three (3) options, companies can use different methods for each employee are typically only need to be reported for full time employees who have waived/cancelled the enrollments.
What are FTE employees, and why are they important?
FTE, or “full time equivalent” employees’ are very unique and important to understand.
1st. These are individuals that are classified by the company as being part-time or “variable hours” … a fancy word for part time frankly.
2nd. In MOST scenarios a company DOES NOT have to report non-full time employees in their ACA reports. The only time employers need to report the non-full time employees is when they have “employer-sponsored” and “self-insured” coverage. IE: coverage they are managing themselves, not via a benefit provider.
3rd. These are important to track because a company is required to provide benefits to their employees if they have 50 or more Full Time or FULL TIME EQUIVILANT employees. This is a matter of COMPLIANCE and not reporting.
The inclusion of Full time equivalent employees by the IRS is to ensure a company is not short changing or intentionally overstaffing and under-employing their staff to keep themselves under thresholds for required processing.
For example
Company has 55 employees in their employment
37 sales staff
10 are mechanics
02 are cleaning or maintenance crew
02 are receptionists or secretaries
02 are office administrators
02 are office executives.
In the above the company cleaning and receptionists are all part-time people, only working 10-20 hr weeks. The office workers and sales staff are all full time employees.
The Company sees the mechanics and decides that instead of keeping the 10 mechanics at Full time (which would put them at 51 FT employees) they’ll hire 6 more mechanics and make the whole group of them part-timers (staying at 41 FT employees)
HOWEVER, the government will take the TOTAL hours these people work monthly and divide by 130! To determine the # of FTE employees.
So if the 10 FT people were doing 160 hrs a month = 160 hrs monthly / each OR 1600 total
And we break that into 16 employees equally = 100 hrs monthly /each OR 1600 total.
To determine the FTE we take 1600 / 130 = 12 FTE!!!!
In the above simply changing the 10 Full time people to part time would actually INCREASE our coverage requirements by 2 employees! By increasing the work force the company is required to offer the coverage now to 12 of 16 employees instead of just the original 10!
This is done ON PURPOSE, so companies don’t attempt to diluted the work force with part time employees in an effort to avoid being require to offer coverage.
The report[iv]
Will a company be penalized?
A major issue with ACA is the way it’s handled, a company may not know penalties are coming until it’s too late. However a company can be prepared as best as it can be.
Why won’t they know about a potential penalty?
Penalties can come from not offering affordable coverage, or not offering a coverage of minimal essential value.
In the latter there is NOTHING that can be done in Clarity or HR to assist a user, this is strictly the responsibility of their benefit provider!
For the former, we can help and which is why the ACA feature is made as part of our HR Module!
A company is required to offer coverage to every full time employee, they may elect to offer it to part time employees as they see fit. This is recommendable, that way if an individual is determined to be FT or FTE later the company has already offered them coverage, and the company is “covered”.
[i] Certification of Eligibility: http://www.irs.gov/instructions/i109495c/ar01.html#d0e1540
[ii] Federal Poverty Line: http://aspe.hhs.gov/2014-poverty-guidelines#tresholds