By Josh Davis
In speaking with a lot of folks in the industry, the Affordable Care Act (ACA) is truly a once in a lifetime opportunity for all of you payroll and HR service providers. It will enable you to capitalize on this historic piece of legislation to grow your business to new heights by simply helping your existing and prospective clients navigate ACA compliance…
However, there are many software vendors out there taking advantage of this and have responded very quickly, touting that they have ACA technology or solutions that you can provide to clients to help ‘automate’ their ACA compliance. In actuality, many of these “solutions” only cover compliance or measurements for a single aspect of the legislation, and don’t provide proactive management of an ACA compliance strategy across an entire workforce.
Here’s what we’ve found to be the main areas where you and your clients should keep the old ‘buyer beware’ adage in mind:
Applicable Large Employer Report
This report is a complicated one to create… most vendors are creating it based on current employee statuses, not based on effective dating of current and previous statuses. And most systems don’t actually have effective dating. What this means is that if a company was over the 50 full-time or full-time equivalent employee threshold for a majority of the year, and then at the time of running the report they were at 49, they would not consider themselves an applicable large employer.
Picture this: you provide your client with that report, and the IRS tells them they owe $100k in fines for not providing employees with benefits, and then they come back to you, the company that provided them with an ACA solution. That’s a quick way to lose a client and gain a bad reputation, but can you imagine the impact that providing that inaccurate report could have on your business if it were provided across your entire client base? You definitely have to watch out for this report because it’s virtually impossible to create without a system that uses effective dating. Yet, there are still companies out there providing the report without effective dating.
Calculations Compliant with Legislation
The applicable large employer report is just one example of how you, as a service provider, need to make sure your software vendor is creating calculations that are actually compliant with the legislation. It’s incredibly important to understand:
- What the law is and what needs to be tracked and reported on
- How calculations are supposed to be done to remain compliant with the law
- That your software vendor is actually implementing the calculations properly
Payroll System Based ACA Solutions
There are two problems with ACA solutions within a payroll system:
- You need to track hours for ACA compliance, and how accurate are those hours without a time and attendance system?
- If your clients are inserting hours into the payroll system or providing them to you to do so, are the averages per month or week being taken into account?
The legislation says full time equivalents work an average of 130+ hours per month or 30+ hours per week. If you’re providing an ACA solution from a payroll-only platform, and a client has a pay period that goes from January 25th to February 10th, let’s say, technically it’s being calculated based on information that’s crossing months and maybe even weeks.
With a payroll system you can look at hours paid but not hours worked in a given period of time, so you’re potentially opening your company and your clients up to some risk here. What liability do you have if the client uses that solution and the IRS turns around and says, “This wasn’t calculated correctly, these employees are full time equivalents.”?
Reports Disguised as Solutions
Another thing you want to be wary of is reports being disguised as solutions. Just because a software vendor says they give you a report your clients need for ACA, doesn’t mean it’s an ACA solution. Reports are incredibly important, but they’re just one piece of the pie. There is still a LOT of manual work that needs to be done for ACA compliance.
You or your clients can get these reports, but will also need to figure out when to run them, who to run them for, etc. If you’re buying an ACA solution you need to ask yourself is it really an ACA solution or are you just going to be providing reports to your clients? You need an end-to-end ACA solution that can help you manage the Affordable Care Act from a full circle perspective, and close the loop when it comes to ACA administration.
For more information on the Affordable Care Act, discussions to have with your clients, ACA solutions and technology, check out our recent webinar.
Do you have any experiences with helping your clients with the Affordable Care Act? Please share them in the comments section below.
About Josh Davis:
Josh is the Marketing Manager at SaaShr responsible for increasing the growth of existing channel partners and the recruitment of new channel partners while positioning the SaaShr brand to the market through the development of both traditional and digital marketing endeavors.