Your agency’s value isn’t based solely on open enrollment. To the contrary, much of the value you bring is in the quality of service offered throughout the year. For this reason, understanding your clients’ biggest challenges and working with them to find a solution is key to retaining and growing your book of business. Are your groups turning to you for ACA compliance answers? Due to COVID-19, a large number of businesses are in a completely different situation than they were at the same time last year. Most have shifted employees to remote work, or have been making staffing changes such as furloughs or hiring freezes. Moreover, a large part of the workforce has also been let go. Consequently, compliance has become one of the biggest HR-related challenges for 2021. In this week’s Broker Tool Belt we focus on how an ACA compliance solution for brokers will enable them to ring in the New Year with a commitment to improving the level of service to their clients and become their trusted advisor.
Why is ACA compliance relevant to brokers?
The Affordable Care Act (ACA) is a federal statute signed into law by President Barack Obama on March 23, 2010. Specifically, the ACA is relevant to group health insurance brokers because of the Employer Mandate provision.
Under the Employer Mandate, Applicable Large Employers (ALE), defined as companies with 50 or more full-time employees, and/or full-time equivalents (FTEs), are required to offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the end of the month in which they turn age 26.
- Affordable Coverage: “affordable” means that an employee’s contribution for employee-only coverage does not exceed a certain percentage of the employee’s household income (9.83% in 2021).
- Minimum Value: a plan provides “minimum value” if it pays at least 60% of the cost of covered services (deductibles, copays, and coinsurance).
The ACA is complex and businesses that fail to comply with this mandate are subject to penalties defined by the IRS. According to the Congressional Budget Office, the IRS could collect more than $200 billion from liable ALEs over the next decade. This is the reason why many employers turn to their benefits advisor to help them understand their obligations under the law. If you currently have ALEs in your book of business, you must be prepared.
ACA Compliance and New Brokers’ Responsibility
Since the Employer Mandate was rolled out in 2015, ALEs have sought advice, updates, strategies, and technology from their brokers. Employers must prove they are compliant by conducting ACA reporting and sending the correct forms to the IRS. The Internal Revenue Service will then verify the business is offering affordable health coverage that meets minimum value. When employers fail to complete ACA reporting, they may receive Letter 5699. When they report but they do not appear to be compliant, they will receive a proposed assessment via Letter 226J.
With high fines on the line, there is more at stake for brokers. When ACA reporting shifts toward an unpleasant direction, employers might turn to the broker to find out what went wrong and determine how to respond or refute the IRS’s claims. In some cases, they could look to their brokers to share the financial burden as well, especially if the ALE can prove negligence. Considering the consequences, the effort of offering an ACA compliance solution to your clients is extremely valuable for you and your agency.
ACA Compliance Solution for Brokers to Become a Trusted Advisor
For your groups to prove they are compliant, they have to file 1094-C and 1095-C forms with the IRS for every employee that qualifies for health insurance. Filing all this paperwork is cumbersome and time-consuming, and human error is punished with IRS fees. ACA compliance solutions are designed to help employers streamline the ACA reporting process, reduce manual workload, and keep your groups compliant. The solution will allow your groups to:
- Calculate ALE status: determine if they are required to prove they are ACA compliant to the IRS
- Track variable hour employees: identify how many of their employees were required to receive affordable, minimum value coverage
- Measure affordability: prove that their coverage met minimum value and was affordable
- Generate the necessary forms: generate the appropriate forms the IRS requires
- Deliver or e-file the required forms: submit and deliver the required forms to employees and the IRS
There are full-service, third-party companies who could personally handle your clients’ filings, similar to how a PEO operates. However, if you seek to build long-term, consultative relationships with your clients and genuinely serve as their trusted partner, it’s in your best interest that they keep ACA reporting in-house. You can introduce an ACA compliance solution as an add-on tool to their benefits administration software.
Below, we share the benefits of an ACA compliance solution for your agency:
Differentiate Yourself from the Competition
Easing your clients’ workload will go a long way. Manual health care filing takes hours of hands-on work. When you introduce a solution that can help your clients automate and speed up the process, you will be helping them save time, as well as money by avoiding the cost of having to hire a compliance specialist. What does it mean for your agency? An ACA compliance solution will add extra value to your agency and it will help you differentiate yourself from the competition.
ACA compliance is complicated due to its many moving parts. However, having the reporting, filing, tracking, and risk management pieces all in one dashboard is efficient and convenient. Furthermore, brokers have an obligation to help their clients respond to IRS penalties, specifically to Letter 226-J. Regardless of the reason for the fine, employers need to submit documentation, such as health plan records, affordability calculations, and employee tracking data, within 30 days, and they will come to you for this information. An ACA compliance solution will make data easily accessible, helping you to quickly locate the necessary reports and effectively assisting your clients.
Peace of Mind
When you know your groups are doing ACA compliance through a technology solution, you can be certain the reporting will be accurate. Chances are your clients are not ACA experts, but technology is programmed to be. In addition, an ACA compliance solution will proactively manage risk by reducing filing errors or missing deadlines. Thus, the danger of having to financially contribute to an IRS fine will also decrease.
Final Thoughts About ACA Compliance Solution for Brokers
ACA means new broker responsibilities, but with an ACA compliance solution, the process might become easier and more effective. You never want your clients to face penalties, especially if there is a chance they will hold you responsible. Don’t give them the opportunity to blame you for the absence of ACA support and guidance. Review your clients’ filings for past years for potential liabilities, explain the ACA reporting process, and make sure they are aware of the common challenges and mistakes. Consider holding periodic training sessions to communicate the importance of ACA compliance. Facilitating ACA reporting will enable you to become your clients’ trusted advisor and differentiate yourself from the competition, supporting both client retention and new business.