Businesses need to be wary of being lulled into a false sense of security by recent White House executive orders and discussions in Congress about rolling back regulations and repealing the Affordable Care Act (ACA), a regulatory compliance expert warned.
Robert Sheen, president and CEO of First Capitol Consulting, Inc. (FCCI), one of the foremost providers of regulatory compliance services to more than 3,000 companies across the United States, said all indications are that government agencies like the U.S. Internal Revenue Service (IRS) are moving forward with enforcing compliance of existing laws and regulations, including the ACA, and businesses need to be ready.
"Despite all the initial talk in Washington, D.C., it has become clear that a full repeal of the ACA is not imminent," said Sheen. "Companies should expect this repeal and replace process at the federal level to take at least several months. When some form of ACA repeal is approved, we should expect a considerable transition period to take place as new regulations are phased into effect. While this process unfolds, continuing to meet IRS filing deadlines for ACA compliance is critical for businesses to avoid financial penalties and the possibility of an IRS ACA audit."
Sheen, whose company writes a blog on ACA compliance, The ACA Times, said FCCI has been preparing its clients for the IRS paper filing deadline of February 28 and electronic filing deadline of March 31 for submitting 2016 data on IRS 1094 and 1095 schedules. Businesses can face potential penalties under the ACA that run into the hundreds of thousands of dollars or higher for infractions such as late filings and general ongoing non-compliance. A recent industry report projected companies could face up to $31 billion in ACA penalties for non-compliance with ACA requirements for the 2016 tax reporting period. Sheen said none of his clients have run afoul of ACA audits by the IRS for non-compliance for the 2015 tax reporting period, but other companies are starting to receive notices from the IRS.
Sheen said the biggest challenge for companies in complying with ACA regulations is gathering all the documentation required by the law. Companies need to provide data for each employee for each month of employment in 2016 to demonstrate they are providing health care to full-time employees. For a company with 100 employees, that is 1,200 separate entries that need to be provided for ACA compliance. "Keeping accurate track of that employment information can be a major challenge for some companies, particularly small businesses with more than 50 employees who are considered large employers under the ACA," said Sheen. "These companies typically do not have in-house resources that can be dedicated to managing the critical data consolidation process."
He said one of the most common mistakes companies make is not providing for gaps in data and processes. Key findings in preparing ACA reporting for the 2015 tax reporting period included the recurrence of errors in the employee data critical to proper ACA reporting. Such errors included failure to properly recognize employee hire dates and termination dates, salaries, employment classifications, and certain periods of leave of absence.
Sheen suggested that companies ask these three questions as they continue to manage implementation of their ACA compliance requirements:
Many companies have not sufficiently invested in the human capital and technological capital (either internally or through external vendors like FCCI) necessary to properly document all actions in a manner that will pass IRS muster, which could lead to a regulatory inquiry or ACA audit. A key failing of many companies is not undertaking periodic assessments during the year to ensure any inconsistencies in employment data consolidation are caught early to avoid serious compliance problems with the IRS.
Properly structuring the flow of data through multiple systems and implementing appropriate validation controls will go a long way towards a smooth end of year ACA experience in the distribution and filing of IRS forms 1094-C and 1095-C.
The current White House administration and Congress have not yet communicated the changes they plan to make to the ACA, but what seems clear is that change in some shape or form is on the horizon. For many companies, using specialists like FCCI to handle their ACA compliance allows them to keep company personnel focused on what really matters, the success of their business.
Sheen said that recent executive orders in New York State concerning equal pay legislation aimed at state contractors indicate that even if there is repeal of certain federal laws such as the ACA, the states may continue to require employers to provide employment information like salaries, gender, race, and age to government agencies.
Even if government doesn't require it, companies who can gather, consolidate and process their employment data into meaningful insights will see tremendous benefits.
"We are living in the age of big data," said Sheen. "Companies that find ways to cost-effectively consolidate their employment data to better understand and manage their businesses will have a real competitive advantage."
First Capitol Consulting, Inc. (FCCI) combines regulatory and tax expertise gained from decades of experience working in national law firms and "Big 4" accounting firms with innovative science, data analytics, and intelligent technology to provide unparalleled regulatory compliance services, tax strategies and actionable intelligence to help companies make wise business decisions.
FCCI's technology platform, Humanefits, powered by its new proprietary Workforce Intelligence Solutions Enginesm (WISE), is creating a revolution through synergies in data consolidation and tax reporting processes layered with E-sign technology. It's a game changer that provides a combination of human resource, financial, regulatory compliance, and actionable business intelligence services at a price affordable for businesses of any size.
Through its national regulatory compliance practice, FCCI is an industry leader in helping businesses successfully manage requirements of the Affordable Care Act (ACA). Among FCCI's wide range of partners are three of the 10 top global accounting firms and 15 of the 20 leading health insurance brokers in the country. Using its Humanefits technology platform, FCCI supports small businesses in implementing an optimal ACA action plan by combining a deep expertise in managing ACA compliance, tax, payroll, human resources and government regulation with data collection infrastructure and proprietary technologies.
FCCI also has helped thousands of local and national businesses obtain federal tax credits and incentives through the Worker Opportunity Tax Credit (WOTC) to facilitate the employment of disadvantaged workers within the federal poverty level, veterans, and the disabled.