By now, you have probably heard about the ramifications of the Affordable Care Act and how it will affect the average employer. Of particular note are a number of new healthcare reporting requirements that are needed to assist in the enforcement of the various health coverage requirements that will be required of employers effective January 2015.
Sage Software has released a terrific solution for your ACA analysis and reporting needs, My Workforce Analyzer (MWA). You now have the ability to conveniently and affordably abide by ACA reporting requirements and make decisions with confidence. MWA is delivered as a module within your Sage HRMS or Sage Abra Suite solution and can help you manage employer-sponsored healthcare and stay compliant with government regulations, analyze your employee hours to determine if you qualify as a large employer, determine if coverage is affordable, explore the pay-or-play decision, examine employee time required to monitor and manage part-time and full-time eligibility, and generate the reports mandated by the IRS, specifically the 1094-C and 1095-C. More on MWA later.
This article is written to not only introduce you to and answer questions regarding MWA, but to walk you through the basics of ACA regulations and reporting at a high level.
ACA, ALE, FTE, FPL, MWA… OMG! What do all the letters mean?
ACA – Affordable Care Act
The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act or ACA, and generally referred to as Obamacare – is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will “continue to be rolled out over the next four years.” Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing conditions.
FTE – Full time equivalent
A full-time equivalent (FTE) is defined as part-time employees whose combined hours add up to 120/mo. For example, two PT employees who each work 60 hours/month = 1 FTE.
ALE – Applicable Large employer
- Whether an employer is an ALE in a particular calendar year depends on the size of the employer’s workforce in the preceding calendar year. To be an ALE for a particular calendar year, an employer must have had an average of at least 50 full-time employees (including full-time-equivalent employees) during the preceding calendar year. (i.e. an employer will use information about the size of its workforce during 2016 to determine if it is an ALE for 2017).
- All types of employers can be ALEs, including tax-exempt organizations and government entities.
- If an ALE is made up of multiple employers (called applicable large employer, or ALE, members), the ALE members are aggregated, that is considered together, in determining whether the group of employers is an ALE. Generally each individual ALE member is responsible for its own employer shared responsibility payment.
FPL – Federal Poverty Level
- a uniform measure of income that is adjusted for inflation and released every year by the Department of Health and Human Services
- Eligibility for a premium subsidy for 2015 is based on the FPL number announced in 2014 ($11,670 for individuals). The new number announced in 2015 will be used for coverage in 2016 ($11,770 for individuals)
MWA – My Workforce Analyzer
The ACA solution for Sage HRMS and Sage Abra Suite clients
Other ACA related terms you need to know
- For a calendar month, an employee employed on average at least 30 hours of service per week, or 130 hours of service per month.
- Coverage is “affordable” if no full time employee is required to pay more than 9.5% of his/her household income for self-only coverage under the employer’s lowest-cost option for healthcare.
- An employer-sponsored plan provides minimum value if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.
Employer Shared Responsibility Provision
- ALE’s must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS.
- Sometimes referred to as “the employer mandate” or “the pay or play provisions”.
- Effective January 1, 2015
Employer Shared Responsibility Payment
- Referred to as the Pay or Play Penalty
- Two potential employer shared responsibility payments (ALE’s might be subject to only one type, not both)
- The employer must pay a penalty for not offering coverage if at least one employee received a premium tax credit or cost sharing subsidy in an exchange. The penalty is $2,000/year x the number of full-time employees minus 30 for 2016 and thereafter. The penalty will increase each year by the growth in insurance premiums. This calculation is based on all full-time employees (minus 30), including full-time employees who have minimum essential coverage under the employer’s plan or from another source.
- The employer must pay a penalty for not offering coverage that meets “affordability” or “minimum value” requirements. The penalty is $3,000/year for each full-time employee receiving a tax credit or cost-sharing reduction. The total payment in this instance cannot exceed the amount the employer would have owed had the employer not offered minimum essential coverage to at least 95% of its full-time employees (and their dependents).
- Each type of employer shared responsibility payment is calculated on a monthly basis and is not a flat amount for all ALE members.
- Excise tax on high-cost coverage
- Beginning in 2018, a 40% excise tax will be imposed on the value of health insurance benefits exceeding a certain threshold. The thresholds are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation). The thresholds increase for individuals in high-risk professions and for employers that have a disproportionately older population.
- A provision in a law or regulation that affords protection from liability or penalty under specific situations or if certain conditions are met.
- Use of any of the affordability safe harbors is optional, and an employer may apply different safe harbors for any reasonable category of employees provided it applies the safe harbor on a uniform and consistent basis for all employees in a particular category.
- There are 3 Safe harbors
- W-2 income - This method allows the employer to use each employee’s W-2 income (Box 1) from the current year to determine affordability
- Rate of Pay (Monthly) - allows the employer to calculate affordability on a monthly basis.
- For hourly employees, 130 hours multiplied by the employee’s hourly rate as of the first day of the plan year or the lowest hourly rate of pay during the calendar month.
- For non-hourly employees, use the employee’s monthly salary as of the first day of the plan year (regardless of hours on which is based)
- Federal Poverty Level - This method allows the employer to use 100% of the FPL income (for a household size of one) to determine affordability
- Take the FPL figure, divide it by 12, and calculate 9.5% of that figure.
Who needs to file what?
If you have fewer than 50 full-time or FTE employees, your company isn’t required to provide healthcare benefits and will not be subject to penalties or filing requirements. In companies with 50 or more full-time or FTE employees, you may choose to offer benefits that conform to provisions in the Affordable Care Act, such as affordability and minimum value coverage, or face penalties if a full-time employee receives subsidized coverage through an exchange. Certain transitional rules are currently in place (through 2015) for companies with 50-99 full-time or FTE employees and also for those with 100 or more full-time or FTE employees.
ALE’s also have information reporting responsibilities regarding minimum essential coverage offered to employees. These responsibilities require employers to send reports to employees and to the IRS on new forms the IRS created for this purpose. This is where Sage My Workforce Analyzer (MWA) can help . The IRS will use this information to administer the employer shared responsibility provisions and the premium tax credit.
ALE members must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, with the IRS annually, no later than February 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates.
Also, ALE members are required to furnish a statement to each full-time employee that includes the same information provided to the IRS, by January 31 of the calendar year following the calendar year for which the information relates. Form 1095-C filed with the IRS must be furnished to each full-time employee on paper by mail, unless the recipient affirmatively consents to receive the statement in an electronic format. The requirement for affirmative consent to receive the statement in electronic format ensures that statements are furnished electronically only to individuals who are able to access them. An individual may consent on paper or electronically. If consent is on paper, the individual must confirm the consent electronically. Employees may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.
ALE’s are required to report to the IRS, as well as to their full-time employees, regardless of whether the ALE actually offers health insurance coverage. Even if an ALE with at least 50 but fewer than 100 full-time employees (including full-time equivalents) is eligible for the transition relief for 2015 from the employer shared responsibility provision, the ALE is still required to complete the information reporting for 2015. For those ALE’s that file 250 or more information returns during the calendar year, they must file the returns electronically.
Keep in mind that penalties will be assessed for noncompliance.
What is MWA and how can it help?
Make no mistake, there’s a lot of work ahead for HR professionals and benefits managers in order to comply fully with the Affordable Care Act. A Human Resources Management System (HRMS) that is designed to centralize HR and benefits information so you can easily access the data you need for compliance and decision making and includes a component to automate the ACA regulations and reporting is essential.
Sage HRMS My Workforce Analyzer (MWA) is a tool that Sage Software first brought to market in early 2014 utilizing their web portal, Sage Source. At that time, MWA was more of an analysis tool versus a reporting tool because reporting requirements hadn’t been established yet. Although MWA provided some valuable information, it wasn’t robust enough for what is needed today. The tool was offered at an annual subscription cost with minimal “implementation” needed and provided some value to those that took advantage of it.
Fast forward to 2015 when the final regulations and reporting requirements have been determined. Sage Software stepped up and reworked the MWA tool, incorporating:
- on premises solution that works with both Sage HRMS 2015 and Sage Abra Suite 9.2
- critical 1094C and 1095C reporting,
- electronic filing of 1094C and 1095C with Sage Wage and Tax filling by Aatrix
- the ability to import dependent and payroll information.
- an online dashboard for analysis
MWA is an additional module that is added in to your current Sage HRMS or Sage Abra Suite solution. It uses data from your company to address specific questions and concerns, produce online dashboards, generate required forms, and help keep you compliant well ahead of deadlines so you can avoid stress and penalties. It utilizes both payroll and HR related information for analysis and population of the 1094-C and 1095-C reports, although not all sections of these reports are currently automated. Sage has committed to having the forms fully automated by mid-summer.
Depending on how your current system is set up and what version you are on will impact the implementation time/cost required to get you up and running. Although the reporting requirement for 2015 has an early 2016 due date, many companies are looking to be up and running well in advance so they can begin looking at the financial impact their benefit plan decisions will have on the organization – does it make sense to offer insurance or pay the penalty, do the plans offered meet the affordability requirements, do they offer value to the employees, etc.
In order to use MWA effectively, you will need to be on the latest version of Sage HRMS or Abra Suite (2015 or 9.2 respectively); have your medical benefit plans set up correctly, including effective and expiration dates; and have access to accurate dependent data. If any of these components aren’t currently available, the information can be gathered and imported or entered during implementation.
MWA is currently available at no charge for the software and support for all clients that are on a Sage Gold Business Care plan, however we do strongly recommend implementation be completed by one of our CS3 Technology certified team members in order to achieve the desired result. If you decide to reduce your Gold support plan to the Silver option, the current cost of the software/support will be incurred. If you are on a Sage Silver Business Care plan, MWA can be purchased and implemented at a fixed fee, 100% money back guarantee through CS3 Technology as well. For clients that exceed the 250 employee threshold, electronic filing will be available through Aatrix and fully integrated with MWA. For those of you how took advantage of purchasing the earlier version of MWA, you will be “grandfathered” in to the newest version and new unlock codes will be provided at no charge.
How automation can help?
Sage HRMS can ease the burden of implementing the Affordable Care Act by helping you:
- Stay current with compliance requirements. Sage HRMS receives regular software updates that keep the system updated for legislative changes, such as the Affordable Care Act. This means that you would not have to do all of the research to stay in compliance. Your HRMS solution would include things like employee notifications, revised forms, and more. It would also help keep your company in compliance with EEO-1, EEO-4, I-9 Citizenship Verification, Vets-100, Family and Medical Leave Act (FMLA), and OSHA record-keeping requirements.
- Better track and manage benefits plans. An HRMS allows you to define and set up unlimited benefit plans and carefully track the costs associated with each plan. You can also project future costs.
- Simplify record-keeping and improve data accuracy. With all of your data in one central location, it’s easier to determine which of your employees participates in each benefit plan. An HRMS greatly reduces the risk of inaccurate data in your database.
- Communicate more effectively with employees. An HRMS enables you to produce employee communications more easily. Announcements can be distributed in an online secure portal using employee self-service. Or you can easily use your employee database to create a letter or email and distribute it.
Perform open enrollment more quickly and with less expense. Online benefits enrollment functionality enables employees to choose the benefits packages they want on a secure website. An HRMS can track the status of enrollment and report on results.
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