Benefits Compliance Solutions is a consulting firm that helps benefits agencies scale their compliance operations. They specialize in benefits compliance consulting, operational consulting, and compliance software. You can learn more at www.benefitscompliancesolutions.com.
At ThreeFlow, we share top insights from benefits professionals tackling compliance challenges. We're excited to feature this guest contribution from Tyler Borders, Principal Consultant & Co-Founder at BCS.
Right now, fiduciary duties are dominating industry conversations. Lawsuits, evolving regulations, and employer responsibilities are all top of mind. But while fiduciary obligations are critical, another compliance issue continues to trip up employers year after year: Affordable Care Act (ACA) compliance.
Despite being law for over a decade, ACA compliance remains one of the most common pitfalls for employers. In this post, we'll break down the most frequent ACA mistakes we see — and, more importantly, how to fix them.
As a benefits professional, you've likely noticed the growing buzz around fiduciary duties for employer group health plan sponsors. Everywhere you turn, there's news about lawsuits, evolving regulations, and the vital role these responsibilities play in protecting both employees and employers.
While fiduciary duties are critical to compliance and have captured the headlines, our experience working with hundreds of employers tells another story. The most common and pressing compliance challenges for employers still revolve around the Affordable Care Act (ACA). Despite its years of existence, ACA compliance remains a stumbling block for many organizations. Let's break down the most frequent ACA mistakes and how to address them.
Common ACA mistakes and how to fix them
1. ALE miscalculation
Many employers struggle to correctly calculate whether they're an Applicable Large Employer (ALE). This is critical because ALE status determines whether you must offer health coverage to your full-time employees and file 1095/1095-C forms with the IRS.
- Part-time and seasonal employee categorization: Misclassifying employees can lead to inaccurate counts. Ensure you understand the distinction between full-time, part-time, and seasonal, and how to calculate full-time equivalents (FTEs).
- Timing issues: Employers sometimes miscount the number of employees during the calendar year. Remember, ALE calculations are based on the prior year's full-time employee count plus full-time equivalent averages for the entire calendar year, regardless of the plan's effective date.
- Controlled group rules: Aggregation rules apply to companies under the IRS definitions of common ownership and must be counted together to determine ALE status.
Fix it: Use robust tracking systems and work with a trusted benefits consultant to ensure your calculations are accurate and consistent. If you have multiple entities, consult with legal counsel to determine if the IRS aggregation rules apply, which would require all companies' employees to be counted together.
2. Reporting confusion
ACA reporting requirements can be daunting, especially with the varying forms and responsibilities for different plan types.
- Who files what: Employers are often confused about whether to file Forms 1094-C and 1095-C or if their insurer handles it. Generally, fully insured ALEs must file the 1095/1094-C forms, while non-ALEs sponsoring fully-insured plans are not required to file any forms with the IRS.
- Self-funded plan confusion: Plans that are self-funded, level-funded, or sponsoring an individual coverage HRA are required to file either the 1095/1094-C forms (if an ALE), or the 1094/1095-B forms (if a non-ALE). Misunderstandings in this area can lead to missed deadlines or incorrect filings.
Fix it: Review your plan's structure carefully and ensure all roles are clearly defined. Regular training for HR and benefits staff can also minimize errors.
3. Paper forms vs. electronic forms
Recent rule changes have clarified who can file paper forms for ACA filings and who cannot. Employers with fewer than 10 total tax forms may still generally file on paper, but larger organizations must file electronically. This shift has caught some employers off guard.
Fix it: Evaluate your current filing process. If electronic filing isn't already in place, it's time to adopt a reliable system or outsource to a vendor specializing in electronic ACA filings.
4. Vendor identification and usage
Another frequent issue is confusion over who should handle various aspects of ACA compliance. From tracking hours to filing reports, many steps can be delegated to vendors - but only if the right partnerships are in place.
- Delegation: Identify who's responsible for each step. Is it HR? A benefits consultant? A payroll provider? Outsourced solution?
- Common failures: Miscommunication or assuming "someone else" is handling a task often leads to compliance gaps. Ensure accountability by designating a point person for each task.
Fix it: Work with experienced vendors and establish clear contracts outlining responsibilities. Regular check-ins and audits can ensure nothing falls through the cracks.
ACA compliance is important
Fiduciary duties are an essential part of benefits compliance, and staying informed about new regulations and best practices is critical. However, it's equally important to ensure the basics, like ACA compliance, are fully understood and addressed.
For employers still struggling with ACA requirements, focus on mastering these fundamentals first. Clear processes, reliable tools, and knowledgeable partners are the key to avoiding costly penalties and protecting your organization. Once you've nailed the ACA, you'll be in a much better position to tackle the next wave of compliance challenges, fiduciary duties included.
Looking to simplify your benefits placement? ThreeFlow can help you streamline your workflows, save time, and ensure compliance with ACA and other regulatory requirements.
Schedule a demo to see how ThreeFlow can support your brokerage in staying competitive and compliant.
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