ACA Services - Sifting Through Your Options
Updated: Jan 5, 2022
The path to Affordable Care Act (ACA) compliance is complex. The range of available ACA services is confusing, disjointed, and still largely undefined. So where do you start? To help you understand some of the options available for your organization and to make the selection process a little easier, we’ve broken down the different service types. Option 1: Manually Manage ACA In-House If your organization’s workforce is almost exclusively full-time employees (FTE), is stable without a lot of turnover, is small, or does not have any HR systems in place, this may be a viable option.
Tracking: The point of tracking is to prove that you are complying with the law. A company with bandwidth and expertise could create a simple tracking sheet. You may even be able to manually manage the waiting periods, eligibility rules, default enrollments, etc.
Reporting: The tricky part with manually managing tracking comes up at the end of the year. Depending on the size of your organization, reporting on the data by completing the required IRS forms may be a challenge. Data has to be consolidated and knitted together to populate the forms you are required to provide to employees and the IRS.
If you decide to manage ACA in-house, be sure to look at both of these pieces to make sure you’re set up to succeed. Should you decide to use another organization for help, the good news is that you have a lot of options. There are pros and cons for each one which differs based on your individual situation. Option 2: Standalone ACA Services A new standalone ACA management industry emerged to fill gaps created by the complex requirements of ACA. These companies either offer services directly to you or work through resellers like system vendors, consultants and brokers.
Tracking: If you don’t have a system, this can be a wonderful option for you. This service monitors variable hour employees to determine if and when they become benefit eligible. If employees become benefit eligible, you retain the responsibility of getting them enrolled. These systems have front-end glitz and glamour with colorful reporting displays and dashboards. However, it’s important to realize that you will still be responsible for providing the data they are tracking. Make sure you know how flexible (or rigid) the system is when it comes to file format. Often to keep their costs low and margins solid, they require data in their format. You lose some time savings if you have to struggle each pay period to provide a file in the correct layout.
Reporting: These third party service providers usually offer ACA forms completion. When partnering with a third party vendor, it is important to understand the difference between tracking and reporting. Monitoring variable hour employee benefit eligibility involves a smaller number of employees and is an ongoing activity. Reporting covers your entire employee population and occurs once a year. These costs should be separate. If they are not, be certain you understand the financial impact to your company over a 12-month period. If you choose to handle reporting on your own, ensure you can get the information out of the system in the format you need.
Other Considerations: If you receive your services through a reseller, typically your contract is with them and not the service provider. The biggest caution here is ensuring your employees’ data is appropriately safeguarded. Take the extra time to check out the service provider’s security policies. You may want a direct agreement or BAA of some sort with them to protect your company. If you have a benefits administration, payroll, HRIS, or time/attendance system, you may have some redundant system maintenance. This increases the likelihood of errors and decreases efficiency.
Option 3: An Existing System The reality of ACA is that no single system has all of the information required for tracking or reporting. The big advantage of using an existing system is that it already has some of the data. Your best option depends entirely on what systems you currently have and what information they house. If you rely on a single system, this might be an obvious solution. However, the vast majority of employers use multiple systems and data must be consolidated for tracking and reporting purposes. The question is then, which one should you use? Unfortunately, the answer isn’t straight forward. The scramble for solutions in the “existing system” market takes several forms. Start by making a list and answering a few questions: What systems do you already have in place? What do they do? What information does each system track/store/report? Which system routinely sends data out to other systems? What will this cost on top of the services for which you already pay? If the best solution for your company is still not obvious, it’s time to weigh the pros and cons of your system options. Tracking: There are three or four systems which may house information relevant to tracking:
Time/attendance systems clearly track the hours of your variable hour employees. This is a critical piece of information. It may already flow into your HRIS and/or payroll system; It may even be part of your HRIS and/or payroll system. On its own, it lacks some of the more crucial pieces of information for proving compliance.
Your HRIS may hold time information, benefit information and it may be integrated or a module of your payroll system. You may one of the lucky few and have all of the data you need in one place through several modules.
Your payroll system manages the tax side of things and most likely has some degree of information about your variable hour employees, at least enough to get them paid. If you have deductions for benefits, these are housed there as well. If you only have a payroll system, or have one with additional modules, this is a great choice for you. Find out the cost and time of implementing ACA tracking in the system. You want to be sure it’s easy to get benefits data in.
Benefits administration systems are down stream of these three systems, at least initially. Eventually election and coverage information from benefits systems flow back into HRIS and/or payroll systems for deduction purposes. One of the pros of using a benefits administration for tracking purposes is that your benefit eligible population is already tracked and maintained in their system. Any individual who becomes eligible has a smooth and seamless transition. Benefit administration systems can also impose plan rules, enforce limits and waiting periods, manage default enrollments, and exchange data with carriers. These systems are rules based and prevent election errors. No other ACA service providers are positioned to do this.
Reporting: Reporting ACA data is a different type of challenge. Instead of worrying about a workflow that withstands maintenance repetition over the year, you need a single, point-in-time solution that aggregates information and transforms it accurately into the IRS required formats. This comes down to data. The best indicator of your optimal solution starts with the question, “Do any of my current systems/vendors currently aggregate data from multiple sources?” Experience matters here. If you have a time-tested method for importing data into your HRIS and/or payroll system, it makes sense to leverage that success. If you tend to keep the data imports into HRIS/payroll to a minimum, look at the processes surrounding the maintenance of your benefits administration system. If you update information manually, find out if any of your systems can import files with new data routinely. Find out if your systems have the ability to both import and export data or if their data integration capabilities are largely a one way street. With the complexity of HR information, system and data integration are critical components. Other Considerations: Some of your existing vendors may offer ACA services, but on a separate platform. It’s important to dig for this information so you can ask intelligent questions about the degree of integration. Other systems support such a high degree of customization across their client base that rolling out an integrated solution which works with ALL scenarios is next to impossible. In general if you have an existing relationship with a vendor and familiarity with their platform, product or system, then many of your security questions have already been answered. If the ACA tracking will be done on a separate platform, ask questions to make sure you know your organization is protected. Is your contract with the reseller or directly with the system provider? This could impact liability considerations. Is it a simple amendment to your existing agreement? Is it a separate agreement? Are the terms for both services the same? In general, working with a known entity simplifies and streamlines this process. However, due diligence means you should ask the question. Do you have the right agreements in place with the people who will have access to your data? Is your employee information safeguarded appropriately? Make your choices with your eyes wide open. There is no “One Size Fits All” solution. Just make sure the solution you pick fits you.