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Top 5 ACA Reporting Challenges to Avoid This Season

By John H. Capobianco, President and CMO of HCIactive

The July 31st deadline for ACA reporting passed this year with an audible sigh of relief. For most companies, complying with the IRS reporting requirements was more difficult than expected, and they wound up outsourcing the process to payroll, benefits administration, or ACA reporting vendors. As one of those ACA reporting vendors responding to the call of duty, we at HCIactive witnessed and successfully addressed the challenges these companies faced. The good news is that these challenges were categorically similar and easily preventable.

Below are the top five ACA reporting challenges that companies experienced last season:


Companies have long recognized that what the IRS defines as a full-time equivalent differs from what companies typically consider a full-time employee. Companies understood that they had to offer health insurance to workers who might not have qualified under in-house definitions, but when it came to documenting who those people were, and whether they received coverage, things got complicated. There were more employees who fell outside of standard definitions than expected, and it was not that straightforward to confirm who they were. The government offered more than one way to determine if someone is “full-time”, but neither method reflected how workers and their hours are represented within common payroll and benefits systems. This complexity created a lot of manual analysis and second-guessing.


In-house systems don’t “speak” ACA—they are not set up to keep track of everything your company needs to know to efficiently comply with the law. The difficulty of knowing who qualifies as full-time is just one of the tracking failures uncovered during the reporting process. Other tracking issues have to do with who was offered coverage, who accepted, and who rejected, who has taken a sabbatical or a leave of absence, or is out on disability. Some salaried employees sometimes produced ACA anomalies, as did seasonal employees or contractors whose hours flex up and down. This latter group may qualify based on a high-work period, but then have their average hours drop and not rise again within the timeframe necessary to maintain eligibility. Depending on how a company is tracking and when it runs the report, it may be out of compliance and not even know it.


The IRS forms 1094 and 1095-C were not easy to complete. The information entered on those forms needed to be recorded as specific codes. The codes reflected an employee’s status, their eligibility for certain plans, whether the employee enrolled and whether they qualified for an affordability safe harbor, among other details. Companies were challenged by the effort of choosing the right code. Technology might have helped, however their systems weren’t ACA compatible and many still aren’t.

Few if any companies have HR, payroll, benefits administration, or other in-house systems capable of reporting employee-related information in terms that can be easily queried and converted into those codes. More commonly these systems report data in native formats that differ even from each other. It’s no wonder that filling out the forms ended up being much more difficult than companies thought.


Finally, you document everything you need, code it accordingly, and transmit the whole package to the IRS, only to see that dreaded message: ERROR. Even companies with the best of intentions and the most ACA-friendly systems still encountered errors in transmitting their forms. The IRS’ electronic submission platform gets a lot of blame for the error frequency, but there is good reason to suspect that most of the errors are the result of dirty data. Employee record systems sometime contain incorrect information. The wrong birth year for an employee, or an incorrectly transposed social security number, or a misspelled name—any anomalies will flag that ERROR message.


As the deadline approached, employers realized they were in over their heads and turned to trusted service providers to help. It was logical to think that benefits administrators, payroll companies, and other third parties would know how to help, and many jumped on the business opportunity. Unfortunately, the lack of experience that employers had with the reporting requirements extended to third parties as well. This was the first time for everyone. The same challenges around tracking, translating data into the right codes for the forms, and data access applied as much, if not more, to third parties as to the employer itself.


The challenges companies faced for 2016 share a common theme—they all stemmed from a lack of knowledge and technology needed to define, track, record, and report information about their employees.

Experiences from the past should make companies better equipped to address the challenges ahead. Most companies know by now that the process is not one that is best handled manually or in-house, but rather outsourced to experienced ACA reporting vendors. A trustworthy vendor should provide expertise, along with the integrated technology needed to execute and provide a system of record for tracking, reporting and filing the required information and forms. Additionally, with the last season behind us, the vendor should have a proven track record for achieving a high IRS acceptance rate for its current clients proving that their technology actually works.

To learn more about the tips and technology needed to overcome ACA reporting challenges contact us today!

HCIactive relieves administrative burden and takes the guesswork out of ACA reporting and compliance with a robust integrated technology solution.


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