The Pros and Cons of In-House Affordable Care Act Compliance
The first year of mandatory compliance has compelled many employers to make their Affordable Care Act compliance plan a top development priority for 2015. Without fail, nearly every focus group goes through the consideration of developing an in-house solution. Whether or not in-house is the right course of action for you is contingent on a myriad of factors, but to help consider the best ACA solution for your organization, we’ve laid out our list of pros and cons to guide employers and HR professionals through the benefits and pitfalls of taking on in-house ACA compliance.
Pros of In-House ACA Compliance
1. Potential cost savings: Nobody likes adding a new line-item to their budget. Depending on the size of your company, and what type of ACA compliance solution you are looking at, third-party ACA vendors could cost annually anywhere from $2K to $18K. Based on the type of clerical talent you already have on staff, you may already have the labor force capable of managing the historic and on-going data aggregation and testing needed each month to assess your organization’s compliance. Contingent on how your organization currently manages the employee benefits enrollment, salary, and time and labor information needed for ACA testing, you may be able to build a steady battle-rhythm of report running, data consolidation, and testing.
For more on ACA Data Gathering, see : ACA Data Gathering Blog
2. You get to become a technical expert in the regulation: No doubt about it, if you take on ACA compliance in-house, you will gain an expertise on the ACA. There is an increasing amount of ACA resources available from employee benefits specialists, lawyers, SPHR outlets, and accountants to keep your studies focused and relevant. The regulation itself with related articles total more than 20,000 pages of information, so it may be wise to get some consultation on the most relevant information you need to know. It is possible to know enough to be dangerous with a few downloads and blogs. The image below shows a quick overview of the four phases of Affordable Care Act compliance, with related sub-topics. For a complete 30,000 overview of the Employer Shared Responsibility Mandate, see what ACA webinars are on the schedule.
Cons of In-House ACA Compliance
1. You must become a technical expert in the regulations: Yes, you did just read this in the list of pros. It comes down to perception and how you value your time. There are basic things that every employer needs to know about the ACA, and then there are the specific questions unique to your industry that don’t have the clear-cut answers found in a simple keyword search. Given the complexity and volatility of the ACA, there are still a lot of benefits brokers who lack the regulatory expertise to give good counsel, which often leads to expensive conversations with lawyers and accountants. These billable hours are often unseen costs to in-house compliance.
2. ACA Compliance is a labor intensive process: In previous blogs, we’ve addressed the complexities in compiling the necessary employee data for ACA testing that is often housed in “silo’d” workforce management systems (some software-based, some paper-based). While some enterprise systems are building out reporting functionality to export ACA-specific reports, most clerical positions in employer’s HR departments are having to run multiple reports from multiple HR software systems (depicted in the image below), and manually compiling the data. The savvier Excel gurus are finding ways with v-lookup functions and file merges to streamline data aggregation, but the process continues to be very manual and time-consuming.
Completing final IRS Affordable Care Act forms is another labor intensive annual process in ACA compliance. For smaller organizations (under 100) the process is painful, but arguably manageable. Come January 1, employers will have roughly a month to compile data from the reporting year and complete 1095-C return forms, due to employees by January 31. For each day of delinquency the IRS imposes a $100/day for each late return form. Labor costs must be properly weighted in a company’s cost/benefit analysis when considering their ACA solution.
Related Topic: View a Complete White Paper on the 5-Ws of ACA IRS Reporting
3. No easy solution to mandatory e-filing: The ACA regulations state that employers who are filing 250 or more 1095-C return forms must file electronically with the IRS. At present, it appears the government has imposed a problem without offering a solution. Outside of private vendors, or using the IRS-provided XML schemas to build out your own electronic filing capability, mando e-filers using in-house compliance measures will likely have to outsource their ACA reporting, or adopt some ACA compliance software that completes the IRS reporting functionality.
4. No shared liability with TPA: Part of the benefit of outsourcing ACA compliance is that you shift much of the liability for filing errors onto a third-party administrator. While the employer retains accountability for data accuracy and all non-compliance fines, many arrangements shift accountability for paying administrative penalties onto vendors. You shift the problem of completing forms accurately and filing on time to a TPA.
Ultimately the question about whether or not in-house Affordable Care Act compliance is right for your organization boils down to three things: Do you have the time and labor resources to do the work, are you confident in your knowledge of the regulations, and, does the complete cost/benefit analysis compel you one way or the other?
For more information on the ACA, consider downloading a helpful ACA toolkit, a white paper on ACA IRS Reporting, or checkout some informational webinars.
