The ACA Waiting Game
Surprised by the sudden postponement in the implementation of the Affordable Care Act's mandatory employer and insurer reporting requirements, experts weigh in on ways employers can take advantage of the delay and what the future requirements may involve.
By Jill Cueni-Cohen
Despite the Obama administration's "transition relief" to help organizations get compliant on the ACA's reporting requirements, most applicable large employers already are prepared to make a smooth transition, says American Payroll Association's Senior Manager of Government Relations Brian O'Laughlin in Washington.
"I talked to an internal group a few weeks ago and asked if they were ready for reporting requirements, and most said yes," he says.
"They had been ready for a while," he recalls, noting that when news of the delay in reporting was issued by the IRS in early July, everyone was caught off-guard.
According to a July 2 notice posted by Mark Mazur, assistant secretary for tax policy at the U.S. Department of the Treasury, the additional year will "allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees."
Since then, the Obama administration has been promising to publish formal guidance describing the transition to reporting requirements, but until they do, employers and their advisors are now left to play the waiting game.
Sarah Bassler Millar, vice chair of the employee benefits and executive compensation practice group of Drinker Biddle's Chicago law office, says companies already providing affordable coverage that will meet the minimum requirements might want to take this time to run a report and confirm that everyone they have as an employee has been offered adequate health coverage.
"Take a second look at your contingent workforce, leased employees or independent workers," she says, "because as long as you're good on coverage, you don't have to think about it. Until we see what the IRS guidance is on reporting, we're not going to encourage you to affirmatively start reporting for 2014 at this time."
However, the IRS has been encouraging reporting entities to voluntarily implement this information reporting in 2014 in preparation for the full application of the provisions in 2015. According to O'Laughlin, testing the implementation of reporting would give employers and the IRS a year to iron out the bugs. "But most of our employers have indicated that they are not going to send their reports voluntarily to the IRS; they plan to run the calculations internally and look at the results internally," he says, noting that employers who had already lined up their reporting requirements have been unhappy about the delay. "But more time will be good. It might allow the IRS to discover new, more efficient cost-reducing ways."
On behalf of the association's membership of more than 21,000 payroll professionals, O'Laughlin communicates their concerns to legislative and executive branches of government. He's also involved in helping to facilitate ways for employers to meet their requirements under the law while supporting government objectives.
O'Laughlin says his organization is currently working with the IRS to come up with ways to make reporting easier. One frontrunner at the moment is to utilize box 14 on employees' W-2 forms. "Since this is where information reporting is sometimes stored, a possible idea is to add a code onto the employee's W-2, saying 'my employer offers minimum health care coverage.' "
He says "the majority of the members of our IRS subcommittee thought box 14 would probably be a good idea," but adds "there are some difficulties associated with that, because payroll must communicate with benefits to determine whether minimum coverage is being offered."
Another idea O'Laughlin's group is "kicking around" is a standard certification sheet that companies can offer, stating that they do offer minimal coverage to employees.
"Then employers can send the certificate to the IRS," he says. "If the IRS then finds out that an employee of a certified company has gone to the exchange and received health insurance through the exchange, they can notify the employer, and they'll determine if the employee was able to receive coverage.
"It would be a dialogue between the IRS and the employer to determine if the employer owes a payment to the IRS," he says. "Our members said that this might be easier to do, because they wouldn't have to code every employee's W-2 and communicate with the benefits department on every employee."
Robert Lowe, a partner at the Los Angeles firm of Mitchell Silberberg & Knupp, regularly works with clients from the motion picture and television industry, where short-term employment is the norm.
"These companies present very challenging issues under these rules, as to who has to be covered, because their employees present a complex variety of situations," he says.
After noting that, while any sense of urgency is somewhat alleviated by the delay, such companies should take the extra year to determine if their health coverage is adequate. "Focus on your population now: who has coverage and who doesn't, and if they don't have coverage, do they need it? In some cases, you may even decide to take the penalty." He also suggests that employers who are charging employees for a portion of the cost of their health coverage double-check that the cost is treated as affordable coverage under the ACA.
Sheldon Blumling, a partner in Fisher & Phillips' Irvine, Calif. office, says that most companies will have to implement large-scale programming to comply with reporting requirements, but employers should wait for official guidance. "It makes sense right now to sit tight and not over-invest in the proposed rules, because they will likely change."