How the Affordable Care Act has Shifted the Way Dynamics GP and Payroll Users Report on Data

An interview with Patrick Doolin, CEO of Integrity Data
There is a huge, almost revolutionary shift in the way that businesses are run now in the new “knowledge-worker” economy, compared to the way they were managed back in the mid-twentieth century. For example, starting Journyx would have been very nearly impossible before the internet. However, in the 2015 economy, once you hit “go”, you’re a global organization on day one. Your company also has to be completely malleable, because anything can change in an instant according to the whims of the economic landscape, new governmental practices, even shifting focus due to changes in staff and budget.
This rapid fire evolution in business practices includes those who are having to take new steps in order to adhere to the Affordable Care Act, which doesn’t look like it’s going away anytime soon – especially when it comes to payroll and reporting standards.
So we checked in with Patrick Doolin, CEO of Integrity Data, to see how his company has handled the Affordable Care Act, how he sees it impacting organizations across the United States, and what to do about trying to stay compliant.
1. You mentioned that the Affordable Care Act (ACA), or what many call Obamacare, has huge reporting requirements for employers, and fines for any company with 100 or more FTEs that is not compliant. How exactly is the ACA a reporting burden on employers?
“Whereas employers traditionally had to provide quarterly and yearly summaries for IRS reporting on their workforce, they now have to make sure they can get at their data for intricate breakdowns in monthly reports. Because payroll data is the body of information that sheds light on how employers will comply with these new and epically exacting reporting requirements, ACA changes to the Internal Revenue Code are transforming the work life of anyone who has anything to do with payroll processing.
In the past, most regulatory reporting for payroll activity centered on dollars – not hours.
But population of IRS Form 1095-C (the complicated new form known as the ACA counterpart to a W-2) hinges on tracking hours of service – not just paid hours of work.
This distinction is important because, to determine which employees are full-time – and thereby eligible for health coverage, employers now need a tracking system that accounts for non-paid time on the job. The task, then, of figuring out which employees to give the 1095-C form to can be tougher than the printing of this challenging form itself.
Not only do employers have to report on which employees are eligible for offers of coverage, they also need to report on attributes of the health insurance offered: Does it meet ACA standards for quality? And in each eligible employee’s case, does it meet ACA standards of affordability?
Deadlines for getting Form 1095-C to employees and for filing its transmittal, Form 1094-C, with the IRS are in Q1 2016. Generation of these files has nothing to do with an employer’s pay or play strategy. If you are an applicable large employer, getting these forms out is a federal mandate.”
2. You said ACA tracking is about hours of service, not just hours of work. So are jury duty and military duty included in this calculation? Are other pay types relevant here?
“Correct: Jury duty and military duty must be accounted for in any ACA calculation of hours of service, regardless of whether the employee was paid for the hours.
Tracking hours of service, not just paid hours of work, is the ACA standard for calculating full-time status – and thereby employee eligibility for an offer of health care coverage. The other non-pay tracking that must be done is FMLA. According to ACA regulations, these non-pay hours must be tracked for each employee and are used to determine if the employer is required to offer coverage to those employees.
These regulations require the employer to begin tracking non-pay time in order to maintain compliance with ACA and avoid penalties. It is important for your time entry and payroll systems to record this time so our ACA solution can utilize it in hours-of-service calculations.”
3. You’ve said that most everyone is already behind on getting such tracking and reporting capabilities in place. Why?
“Need-to-knows about the fine print of Affordable Care Act regulations got overlooked – or intentionally tuned out – amid news coverage of the drama with Obamacare repeal-and-replace politics. An ACA reality is that although this federal overhaul of access to health care is on par with Social Security and Medicare in the history books, in current public awareness, the Affordable Care Act has come to be on par with night-time soap operas and cable-TV reality shows.
The employer mandate is the last, and smallest, set of ACA rules to be implemented. And that implementation had twice been delayed. Each grace period was outlined as having a limited scope. Each grace period was defined in terms of granting more time to secure information systems that would do the required heavy lifting. But, again, these points were missed or blurred in public awareness.
So by January 1, 2015 – when the penalty assessment period started for employers with 100 or more full-time employees and full-time equivalents – some business owners and advisers continued to hit the snooze button.
Part of the ho-hum mindset traces to the botched implementation of the ACA individual mandate. Although that failure had to do with technology on the watch of the Department of Health and Human Services, a government body that had no experience engineering data exchanges on a herculean level, perceptions were that such a processing failure would be the case for the enforcement of the employer mandate. So why hurry, right?
But the government agency tasked with enforcing the ACA employer mandate is the IRS, not Health and Human Services. And with this being one of the need-to-knows that was missed, also missed was awareness of the extent to which the IRS is prepared to process ACA returns from insurance providers, the exchanges, individuals and now employers. In place is a massive XML clearinghouse – an almost $800 million investment – that will know lickety-split who was ACA compliant and who was not.
Perhaps the most snooze-button pushing came with perceptions that the Affordable Care Act was going to be repealed. The last disconnect in employer awareness of ACA must-dos came from wishful thinking that, with the U.S. Supreme Court ruling in the King v. Burwell case (the latest judicial challenge to the ACA), all compliance needs for this legislation would be erased.
Since the Supreme Court ruling late June 2015 did not make this federal mandate go away, we are now seeing new interest in learning more about ACA compliance: Employers realize they MUST take action or face very large penalties.”
4. What are the ACA penalties?
“There are three types of ACA fines that an employer can incur:
      a.  Penalty for not filing any federally mandated ACA report

$500 per required form, with maximum penalty of $3 million.

      b. Penalty for filing an ACA report documenting that an employer did not offer health insurance

Triggered when an employee who should have been offered coverage goes to an exchange and gets subsidized coverage
Called the “ACA sledgehammer penalty”
For 2015, this penalty for each month that an employer does not
offer coverage to an eligible employee is $2,084, divided by 12, multiplied by the total number of full-time employees or full-time equivalents minus 80. (In 2016, this number for exemptions drops from 80 to 30.)
The current multiplier, before taxes, is $173.67 a month per employee, for each month coverage is not offered.

      c. Penalty for filing an ACA report documenting that an employer offered health insurance that does not meet ACA standards

Triggered when an employee who should have been offered coverage goes to an exchange and gets subsidized coverage
Called the “ACA tack hammer penalty”
For 2015, the penalty for each month that an employer does not offer coverage which is deemed affordable or which does not meet the ACA standard for minimum value is $3,126, divided by 12, multiplied by the number of full-time employees who sought coverage on an exchange and received a premium tax credit or cost-sharing subsidy that month – not to exceed the following: $3,126, divided by 12, times the total number of full-time employees or full-time equivalents minus 80
The current multiplier, before taxes is $260.50 a month per employee, for each month offered coverage was not deemed affordable or did not meet the ACA standard for minimum value.”

5. How can Integrity Data help? 
“We help with education and with automation. We believe both are needed for organizations to be confident with their level of ACA compliance.
We provide a lot of education, including informing employers that even if they believe they are ACA compliant by having offered quality health care coverage all along – as many have – they will not be fully ACA-compliant until they file the new federally required IRS forms documenting that they offer coverage. This detail is one of those fine points lost amid headlines over the political drama.
We also educate employers on the mechanics in the law that trigger penalties. We show them that we have quick-to-install, easy-to-use automation that monitors these triggers.
Briefly, the law is about providing offers of coverage to eligible employees and making sure that coverage meets the ACA standards for minimum value and affordability. In plain talk, we demo how our ACA Compliance Solution monitors both of these triggers.
Our automation does both the regulatory reporting that is required annually and the deep internal reporting that is needed monthly for ACA penalty management. Identifying newly eligible employees is tricky – and we have that process covered.
The yearly regulatory reporting mandated by the ACA boils down to the challenging 1095-C form that must be sent to ACA-eligible employees. It is often compared with the W-2, however population of Form 1095-C is far more complex. Unlike a W-2, it does not go to every employee. And it is not based on summary data for an entire year but must be provide a monthly breakdown of data for each employee.
Form 1095-C is the ACA return that tells the IRS whether an employer offered health insurance to every eligible employee and if the offering was ACA-compliant. There is a science to identifying which employees need to get Form 1095-C and how to populate it for distribution to them. We have the logic for this science built into our ACA solution. We simplify production of the necessary 1095-Cs for employees and we also handle generation of the employer transmittal – Form 1094-C – for the IRS.
Internal monthly tracking is also important – both because that is what the yearly IRS reporting is based on, and because you need this business intelligence to manage risk of ACA penalties. Our software handles this as well.”
6. Some payroll service providers charge exorbitant fees to report this for you. How much do they charge?
“We can’t speak to such exact pricing, but we can cover factors that we know lead to escalations in pricing for ACA data management:

Some payroll service providers require full implementation of their HR module in order to accommodate ACA reporting. In this scenario they are using their ACA compliance as a tool to get employers to purchase their full-blown HR modules. We do not.

Some payroll service providers charge transactional fees as employees enter and exit a workforce’s ACA-eligible body. In industries with a high turnover, these fees are significant and add up quickly. We do not price according to this model.

Some payroll service providers are charging per return for the generation of 1095-Cs and for the e-filing of Form 1094-C. We do not.

Integrity Data provides a simple annual subscription so employers know what their cost will be and do not have to worry about being nickel-and-dimed by hidden fees. All of our pricing is provided on our website at http://www.integrity-data.com/software/aca-compliance/.”

7. Can GP help with this in any way today?
“Yes. The payroll module of Dynamics GP has had features that, viewed with an ACA lens, make it compliance-friendly:

The ACA requires that all employee hours are tracked. Unlike what is required for other IRS forms, a clear distinction with the ACA is that tracking of hours is not by check date, it is by pay period transaction date. This is a big departure from W-2s and IRS Form 941, which hinge on check date. The way hours of service are credited to salaried employees in GP is consistent with what is now required under the ACA. Even the tracking of sick time and vacation time for salaried employees in GP Payroll is exactly as directed by the ACA. By crediting 40 hours of service per week for salaried employees, GP Payroll satisfies how the ACA advises that hours are tracked for salaried employees.

The ability to have non-dollar payroll transactions where an employee is credited with applicable hours is a huge features benefit that Dynamics GP payroll provides. This functionality overcomes many of the workarounds needed in meeting compliance for ACA tracking. It also enables companies to meet the new requirements without having to drastically change their payroll processes.

Dynamics GP maintains detailed transaction history that monitors hours within specific time frames. This level of detail is now crucial for ACA compliance. It is absolutely essential to have this level of data available for audit purposes. Whether it be for capturing hours associated with salaried employees (as discussed), or for precise tracking of employee hours, Dynamics GP Payroll has always met this challenge.

Dynamics GP also provides flexibility in how deductions can be set up that are well suited for ACA tracking and compliance. Companies that have offered health care coverage on a shared contribution basis with their employees have traditionally used a fixed amount for this deduction. With ACA expanding coverage to all full-time employees, companies must wrestle with the “affordable” requirements and safe harbors when applicable.

In Dynamics GP, the ability to set up deductions as a percent of gross wages will go far for companies wanting to ensure that employee contribution stays within the boundaries of affordability as defined in this legislation when specific safe harbors are used. Having choices on what methods to use in these calculations is important as it offers employers some protection on having to absorb a large percent of the health care coverage costs.

The law created some safety nets for employers to use in order to assure an employee pays a portion of coverage regardless of how many hours they actually work in their stability period. Deductions in Arrears is a feature in Dynamics GP that gives employers the vehicle to keep track of when an employee does not make enough during a pay period to meet his or her share of their self-only coverage.

8. What other questions should I be asking?
If GP Payroll is already so ACA friendly, why do I need to consider an enhancement for ACA compliance?

Though the payroll module in GP has an ACA-friendly foundation, that grounding is not enough to populate Form 1095-C according to all the intricate ACA changes to the Internal Revenue Code. GP 2013 and GP 2015 provide basic 1095-C form generation. However, in many cases the determination of the codes to be placed on the forms must be done by the person generating the forms. Our ACA solution makes all of the proper determinations automatically and does not require the user to modify the data on the form.
Two circumstances also exist where the GP form generation is not acceptable to the IRS:

1) If an employer is part of a commonly controlled or affiliated group, the ACA requires that Form 1094-C be filed with consolidated reporting. An example is two or more different organizations with common ownership or control must consolidate their employee data for ACA reporting and cannot do the reporting for each individual organization. ACA functionality standard in GP 2013 and GP 2015 will generate Form 1094-C from a single GP company, but will not consolidate the employee records for multiple companies as required by the IRS. Our solution provides this functionality in order to meet the compliance regulations.
2) If an employer has 250 or more full-time employees or full-time equivalents, they then must file Form 1094-C electronically to the IRS. Dynamics GP does not support the e-filing of the ACA forms. Our solution includes e-filing at no additional cost.

Is mid-year implementation possible with the ACA solution I find?

Mid-year implementation is possible with Integrity Data’s ACA Compliance Solution. It is important to note, though, that if your company is at risk of ACA penalties (referenced above), it is best not to wait. Here is why:

Our solution will populate the IRS forms at any time, but if you do not have the monthly BI that you need to get the mandated offers of coverage to newly eligible employees, you are risking the accumulation of penalties that are now being assessed on a monthly basis.

How long will it take to implement your ACA solution?

In most organizations, we can help users be up and running and producing their first set of eligibility reports within an hour or two. Additional training and consulting is always available for those who need further assistance.”

9. Do employers with fewer than 100 FTEs have to comply with the new ACA regulations?
“For calendar year 2015, the threshold for employer compliance was raised from a combined 50 full-time employees and full-time equivalents to 100 full-time employees and full-time equivalents. Beginning in calendar year 2016, that number reverts to 50 – which is what the law originally stipulated.
Specifically, this means that the penalty assessment phase for employers with 50 to 99 full-time employees and full-time equivalents begins January 1, 2016. Therefore, it is very important for these employers to be implementing their ACA solution prior to January 1, 2016. For employers who are in industries vulnerable to ACA penalties, the financial consequences of procrastinating past October 1, 2015, are of white-knuckle importance.”
About the Author: Curt Finch is the CEO of Journyx, a Certified Microsoft Partner. Journyx maximizes the value of Microsoft Dynamics by adding enterprise time tracking. Journyx Accountlink for Microsoft Dynamics allows companies to quickly implement a complete time tracking solution using existing business data in Dynamics. Connect with Curt on Google+.
About JournyxA Certified Microsoft Partner, Journyx enterprise time and expense tracking software is an add-on that integrates with Microsoft Dynamics GP as well as Project Accounting. Learn more at http://journyx.com/dynamics.
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