Many organizations have years of ACA reporting experience but continue to run into ACA pitfalls and find it challenging to achieve a high-level of accuracy. And with the IRS actively sending penalty notices since the fall of 2017, mitigating ACA risk should be a top goal.
We have worked through a variety of ACA-related issues with our clients and would like to share our observations.
Top ACA Pitfalls
Pitfall #1
Your 1095-C forms were printed after the IRS deadline. Update: The deadline remains January 31st, but in December 2022, the IRS permanently extended the deadline to furnish individual statements to March 2nd.
Tip: When choosing an ACA vendor or printing partner, make sure you verify what internal deadlines they have set to ensure timely printing. Also, check their references to make sure they can handle your business. Have they integrated with your HRIS or payroll system before? If they are only asking for files at the end of the year, the chances of you missing the deadline for distributing forms may be higher.
Pitfall #2
You switched ACA compliance vendors or HRIS software vendors and don’t have the historical information you need to respond to an IRS penalty notice.
Tip: Make sure you keep documentation and the source data of your ACA filings for at least 5 years (or as suggested by your tax or legal advisor). If you switch vendors during that time, see if your previous vendor offers one of these options:
- Port the historical data over to your new system
- Hold on to a backup of the data
- Let you print out and save a hard copy of the raw data
Pitfall #3
You received a Letter 226J and your finance department was surprised to find out that the company owes over $1 million.
Tip: Start by verifying if the penalty is valid. It’s also helpful to include your finance department in ACA reporting routines consistently, with or without a potential penalty. Even if it’s a simple update on your compliance risk statistics this can help you avoid surprises down the road. Learn what to do when you receive a Letter 226J.
Pitfall #4
Your organization didn’t offer coverage to variable-hour employees who measured as eligible.
Tip: There are several things you can do to help avoid this situation and mitigate your organization’s risk:
- First, you should be using an ACA solution that allows you to easily track your employees’ eligibility. You should look at these reports on a monthly basis.
- Also, using the look-back method of measurement can help ensure that you catch potential issues earlier and give you time to react to unexpected trends.
- Remember, your variable hour employees are rolling off measurement periods every month, so consistently loading data into your ACA software and reviewing reports is a must.
Pitfall #5
You acquired a new company and couldn’t merge the ACA data.
Tip: Especially with stock acquisitions, the acquired company’s problems could become your problems back to the start of 2015. It’s important to interview your ACA vendor to make sure they can help aggregate your data from multiple sources to streamline ACA reporting. Have a plan B in place should the future of the acquired company’s data or personnel be at risk.
Pitfall #6
You submitted your organization’s ACA filing to the IRS but there were errors.
Tip: It’s difficult to submit to the IRS without errors caused by SSN-last name mismatches, but there are several checks and balances you can include in your process to help avoid errors.
- Spot check data along the way. In addition to reviewing your reports monthly, spot check 1-5 percent of your employee base in the summer to ensure the Affordability and Offer of Coverage and Safe Harbor codes are accurate.
- Review Measurement Period data before open enrollment to ensure eligible employees are offered coverage.
- Update your vendor with any employee information changes (dependents, SSN, names).
- Ensure at least one health plan offered is affordable for all eligible employees.
Pitfall #7:
There’s turnover in your HR team and you lost the resources that manage ACA reporting.
Tip: Your ACA vendor should provide ongoing training and have good documentation on how your company’s ACA routines are managed. In addition, there should be an Account Manager at your ACA vendor who knows and understands your business. This way your new ACA resource can be brought up to speed by your ACA vendor and have onboarding documentation. If you must stop your data feeds during a transition, restart them as soon as possible to help avoid costly delays.
Pitfall #8
Your ACA Filing to the IRS Was Rejected
Tip: It’s most common to encounter this pitfall if your organization is submitting to the IRS for the first time or has changed its process.
- Submit a test upload. If it is the first time your company is submitting to the IRS or if you’ve changed your process, it’s best to do a test to help determine if there are any issues with the file format.
- You should also verify both EIN and company name are accurate before your submission to avoid a common error.
- Use an ACA vendor who can transmit and troubleshoot errors for you. They should have an excellent on-time track record.
Need Help Navigating ACA Pitfalls?
ACA reporting compliance is complex and time-consuming, and if not done correctly could lead to expensive penalties. Our holistic Benefitfocus ACA Compliance Solution helps to simplify ACA reporting by managing it for you. We have successfully helped our customers achieve a higher standard of accuracy and include expedited IRS penalty assistance. Learn more about our Benefitfocus ACA Compliance Solution or request a demo.
The information provided does not, and is not intended to, constitute legal advice; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information.
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