Got ACA Compliance? The Tax Man Cometh

The IRS wants you!  Well actually they want to make sure you are taxed (not penalized according to the Supreme Court) if you did not comply with the affordable care act.

There are some scary statistics floating around lately such as…

  • The IRS has identified close to 50,000 ALE (applicable large employers) as non-compliant for the tax year 2015
  • Over $4 billion in taxes accessed to date for the same year, 2015
  • Simple math with the first two items comes to an average $80,000 penalty per ALE assessed in 2015.
  • It has been seen that some assessments have been for over $1MM (I have seen some)

Bottom line is that it took a while and some employers may have even thought it would all blow over, but the IRS has become more sophisticated and efficient in identifying ALE businesses and sending out assessment letters.

If you have done the right thing, but simply made some mistakes, the IRS has been very good about easily reconciling and correcting these assessments.  The key is to make your responses timely and answer the letters truthfully.

My employer, Cimplx, has been able to assist clients with this for the past year and we have seen almost all penalties adjusted to zero or reduced to a fraction of what was originally assessed.  Some were very scary, but in all cases we encouraged calm and clear responses and we have seen very good results.  Not because we have some magical IRS wand, but because we worked with our clients well before the letters began.  We work with them access their own risk, make smart decisions and to properly report & file each year.

The reality is that if you did the right things, you will not owe a penalty, excuse me, be assessed a tax.  Here are 10 things you can do to stay in good graces with the ACA tax man.

  1. Make sure you file your  1094/1095 each tax year.
  2. Don’t file forms for every employee, only the ones who were full time for at least one month of the year and/or who were enrolled in self insured coverage.  Every form you file is a liability that may come back to haunt you.  The IRS does not need to know you enrolled a part time employee in a fully insured plan.  They specifically state in the instructions that they dont want to know about it.
  3. Make sure you include retirees and cobra recipients who did not work for you this tax year, but were enrolled in a self insured plans.  This is often overlooked by payroll companies as the employee was not on payroll this year and they dont have a record of non-employees.
  4. Make sure you send each of the employees reported a 1095-C form before the end of January.  This is the most difficult task of the whole process.  Employers who have not done this before will be surprised how much data they need to accumulate to complete this process by the end of January.  The problem is the data is not complete until December 31st or usually by the first pay period that ends in January and then you have to complete the forms, print the forms, stuff the envelopes and have them in the mail in just a few weeks or less.
  5. Make sure you dont forget to e-file your forms before the end of March each year.  This is a little easier given you have a few months to get it done and it is the same data you mailed to the employees.  The difficult part here is registering as a transmitter with the IRS and getting your test scenarios done and your xml file created before this deadline.  Cimplx Reporting and Reporting Plus will make this a snap and no need to go through the transmitter registration process, they do it for you as part of the deal.
  6. Make sure you know how to determine who is full time.  Seems simple enough given the law basically says, that in general a person who works on average 30 hours per week is full time.  And in most cases it is simple.  Everyone who works at Cimplx is full time because they are salaried and no one works less than 30 hours per week.  Not much math involved here.  But for some employers this is much more difficult.  Notably schools, light industrial, restaurants, hotels and other businesses with variable hour work forces or a large seasonal staff will have a need to keep a close eye on things each month, not just at years end.  Again, Cimplx’s Compliance Action Center will make short work of this problem.
  7. Make sure you offer to 95% of your full time employees.  This is the biggest mistake an employer can make.  Some employers have missed this mark by only one employee.  It is painful, but this is a major mistake and the industry refers to this as the “sledgehammer penalty”.
  8. Make sure your plan is qualified as Minimum Value.  This should really fall on your insurance broker to come through on this qualification.  They will be your trusted adviser and they will know what is what when it comes to this criteria.
  9. Make sure your employee contribution falls into one of the three affordability safe harbors offered to employers.  The value this is based on is adjusted for inflation each year, so dont let this get buy you because it was OK last year.  Your broker can help with this calculation or if your a customer of Cimplx, give us a call we will help if needed.
  10. Pay attention.  The IRS regulations state that the ultimate responsibility is with the employer.  You can fire your vendors or your employees for making a mistake on this, but you will pay the assessed tax when it is found by the IRS.  Nothing will get you free of that burden if it is truly due.  Be careful to wholeheartedly trust that your payroll or HCM system is fully understanding your unique situation.  If your getting ACA compliance free with your payroll or through your insurance broker, you will usually get what you pay for.  So, Trust But Verify!  Or Inspect what you expect! or any other euphemism that fits, but the buck will stop with you.   Your vendors and employees will pay closer attention if they know you are paying attention, so be sure to question what is going on regularly.

I hope this helps and that you have a successful ACA reporting season.   Cimplx is here to help and we have been very successful in eliminating and mitigating risk for our compliance clients.  But with whoever you choose, make sure your vendor is more knowledgeable on this subject than anyone else in your supply chain, you will need this to be true when the tax man cometh.

Six Mistakes to Avoid When Implementing a new HCM platform

I recently took a trip to Laughlin, NV, a small tourist town on the Colorado River at the very southern tip of the state.  The tour I enjoyed the most was a jet boat tour down the river to Lake Havasu on the Arizone/California border.  A short layover where we toured the London Bridge (an actual London bridge was purchased taken down, brick by brick, and reassembled in Lake Havasu)  and then a 2 hour trip, back to Laughlin, up the river by jet boat again.

The draft of the boat on plane or in layman terms how deep in the water the boats sits when travelling at high speed is 14 inches.  The bottom of the river is covered in stones and in some places was only 18 inches deep.  The boat was quite fast and I am certain if we were slightly too far to the left or right of the safe line in the river, we would have easily ran aground with considerable damage to the boat and our tour group.   Having a boat captain with the experience to know the right line to travel was the only way to make this trip.  I would not have dared to do this on my own .  The responsibility for what might and would probably go wrong would have been too great.

Implementing a new HCM platform is not an easy challenge and one of the first mistakes made by many is not choosing the right implementation partner.  HCM partners are professional organizations who work with you and guide you along to ensure the technical details and your specific needs are properly set up.  This is extremely important and your chosen partner will undoubtedly perform this function much better than you could on your own, given this is their line of business.  But beyond the technical and set up functions, there are still some mistakes that are more of a planning and organizational structure and are all squarely in your control as the client.

The right implementation partner makes the complex simple and will make your decision to upgrade to an HCM system all that more confident.  Although you may only do this once or twice in your career, an implementation partner makes this journey multiple times each year and will make sure it is done right.  With that said, the tips below are good advice and will help you in asking the right questions with your implementation partner.

 1.  Don’t Rush It

Give yourself and your partner enough time to properly implement the new platform.  Not allowing enough time will increase the risk that the implementation may fail.  With that said, it is often the case that organizations do not allow enough time to ensure success and find themselves under-prepared for the overall project.  You will want to make sure adequate time is allocated for testing and data conversions.  You will also want to pay particular attention to ensure enough time is available for reviewing requirements and working through them to ensure they meet your organization’s needs.

When assigning internal roles and responsibilities keep in mind that your staff still have their day jobs and in many cases will not be able to dedicate 100% of their time to the project.  This is an important factor to discuss  with your implementation partner.  Make sure they incorporate this factor when creating milestones and deliverables.  And make sure to allow enough time for stakeholders to review requirements and configurations.

2.  Don’t be too conservative, either

This is a little contradictory to the first point of not rushing it, but is also a fact that if the timeline and milestones are too long then this can also cause problems with an implementation.  Adding time just as a buffer can cause the team to lose momentum and unnecessarily slow down and lose traction.

Try to keep your timeline realistic.  Make sure you have time to complete each task and milestones, but dont be so cautious that you add unnecessary delays.  Padding each task will add up and slow down your project significantly.

3.  Use the right project methodology

Project management is a skill with specific training and methodologies associated.  Ask what type of methodology your partner is using and if it is appropriate for the type of project being implemented.

Two popular methodologies are Agile and Waterfall.  Agile groups tasks into sprints of work with smaller goals being met,reviewed and adjusted with each sprint.  Waterfall has much larger milestones with the project being divided into phases.

Waterfall is considered rigid where Agile is thought of as more flexible.  Waterfall sees the implementation as one large project divided into phases.  Agile sees the project as a collection of many smaller projects.

In Waterfall, the scope is determined in advance of the project and there is little or no change to the scope during the project.  In Agile the project scope is more flexible and may be changed even after the initial planning has been completed.  With Waterfall each phase such as designing, configuring, testing, and accepting are completed once each.  With Agile each of these same functions happens multiple times with each sprint iterating through these same or similar phases.

The key take away is that Waterfall is keyed on completing the project as designed and strictly following the  plan where as Agile is more focused on customer feedback with each sprint and strives to reach a collaborative (customer/vendor) result with each phase.  Typically your implementation partner will have a methodology in mind that they have had success with.  You just need to know if you have a preference and if their methodology works well with your internal preferences.

4.  Scope Creep

It is important to appoint a strong project manager who will challenge decisions and protect the project from scope creep from both your internal project team and with the implementation team.  Roles and responsibilities established at the beginning of the project must be implemented and followed.  Each leadership decision must be evaluated and compared to the original scope of the project and due consideration must be paid to ensure the project does not become extended due to wants versus needs.  New requirements may need to be pushed into a new project to be completed after the original scope is complete, versus continuously adding to the existing project.  It is important that the project have a start, middle and end.  The project manager’s goal is to see the project complete and defend scope creep.

5.  Having the right person in each role.

It is not necessary to have your entire staff on the project just because they are willing and able.  Key people with specific knowledge of the role and who are responsible for the results will make the choice for the role assignments for the project.  Having the right person for the right role is very important.

It is equally important to allocate people with enough time for the role.  Make sure the  right people for the role have the right amount of time available for the role.  Don’t let their day job suffer as they are allocated too much time on the project.

6.  Change Management, So important!

Do not forget the 3 C’s, communicate, communicate, communicate.  A new HCM can seem more difficult to use without the proper training and testing.  Failing to discuss how the new HCM will change the everyday workflow with the people who will be effected is a recipe for disaster.  It is very important to discuss how the message will be delivered and to craft a communication plan.  Knowing how you are going to engage with stake holders and champions to garner buy-in and ownership in the project’s success is critical.  All of this is communication and it is vitally important.

The old way of doing business, good or bad, is how your people are used to operating and change often may seem worse before it seems better.  This is usually due to people not knowing how to accomplish tasks they did before with the same proficiency and muscle memory.   Terminology or workflow may be different and initially it may seem foreign or cumbersome.  Having a good change management process is very important and can make or break a successful implementation.

Conclusion

No one wants to be part of an unsuccessful implementation.  Time, effort and money are all valuable and no one wants theirs wasted.  Give yourself the time to do it right without additional padding.  Make sure the project methodology is compatible with your preferences and  ensure the project is properly governed with a strong project manager to keep scope creep from taking over.  Make sure you have the right people on the bus and that they have a plan to communicate the changes to be implemented thoroughly.  And most importantly choose the right implementation partner to avoid the rocks in the river.

 

Come on inner peace, I dont have all day

Photo by James & Carol Lee on Unsplash

Most managers want to focus on the strategic goals of the company, but find themselves tied up with repetitive problems versus addressing root causes. It takes less time, in the moment, to put out the fire than it would to do an arson investigation or find the loose wiring that caused the fire.  Easier to simply put it out and move on.  But is it?

Are you too busy bringing on new customers to find out why the existing customers are leaving?  Do you find your day is full of meetings with employees about their problems versus finding out what is causing the problems?  Or are you too busy hiring to find out why people are leaving?

A common phrase is that, “It is difficult to run the company, when you are running the company.”  Finding a way through this typically involves committing to improve the effectiveness of your work while at the same time focusing on the current business challenges and strategies.  Some basic steps to keep in mind to help with this challenge are…

  1.  Evaluate and strengthen the basic processes and take a strong look at how well your team is following them.  Break free from the concept of “this is how we always do it”  Look at the process and identify where it commonly breaks down.  Or you may also find that the way we are doing it, is not the way we designed it.  Work arounds and alternative solutions may have become the norm and are causing other disruptions in down stream processes.
  2. How can you make time for improvements?  Find ways to get your team together and discuss improvements to the current state.  One way of doing this is to get your team engaged.  Engaged employees will find the time and will have the drive to make the solution successful.  You are not in this alone.
  3. Are you truly committed to stop wasting time in your own work?  As problem solvers, there is comfort in solving problems, it’s what we are good at.  But as managers, our duty is to elevate our team to prevent and otherwise solve their own problems.  If we are truly doing a great job then we should feel the problems start to resolve themselves through a strong process and an empowered team.  That is when our involvements are more meaningful and strategy related.

My psychologist tells me that the first step in solving a problem is admitting I have a problem.  If you are a manager who spends the majority of your day worrying about things that have happened in the past or in the present versus what should be happening in the future, then you have a problem.  Admit it is a problem and start finding ways to spend time focusing on the future.