Retroactive Benefits Changes: Risks and Challenges for Employers
Benefits adjustments can create financial, operational, and compliance challenges.
Ensuring information is accurate and consistent across systems is an important part of meeting ACA requirements.
Compliance with the Affordable Care Act (ACA) requires more than offering health coverage to eligible employees. Employers must maintain accurate information about employee hours, employment status, coverage offers, and enrollment activity throughout the year. When payroll, human resources, and benefits administration systems contain inconsistent information, employers may unknowingly create ACA compliance problems that can lead to reporting errors and potential penalties.
For applicable large employers (ALEs), ensuring that information is accurate and consistent across all systems is an important part of meeting ACA employer shared responsibility and reporting requirements.
Payroll, HR, and benefits administration systems serve different purposes, but they often rely on overlapping employee information. Payroll systems typically maintain compensation and hours worked, HR systems track employment status and personnel changes, and benefits systems maintain eligibility, coverage offers, elections, and enrollment effective dates.
When these systems do not contain consistent information, several problems can arise:
Not every discrepancy constitutes an ACA violation. However, inconsistent records can make it more difficult for employers to verify that coverage was offered appropriately and that reporting information is accurate.
Many employers discover inconsistencies when preparing Forms 1094-C and 1095-C. At that point, resolving discrepancies may require reviewing months of payroll records, employment history, coverage offers, and enrollment activity.
For example, an employee may be classified as part-time in one system while payroll records indicate that the employee worked enough hours to potentially qualify as full-time under the employer’s applicable ACA measurement method. If the discrepancy is not identified, the employer may fail to make a required offer of coverage.
Similarly, an employee’s termination date may differ between HR, payroll, and benefits records, resulting in inconsistent coverage information and potentially inaccurate ACA reporting.
Identifying these issues throughout the year is generally easier than reconstructing employee records during the annual reporting process.
Employers should establish procedures to ensure that information remains accurate and aligned across all systems.
Maintaining consistent information across systems requires coordination among HR, payroll, and benefits teams. Even when systems are integrated and data is exchanged automatically, employers should not assume that information is always complete or accurate.
For example, a change entered into an HR system may not automatically update payroll or benefits records. Similarly, a correction made in one system may need to be communicated to other systems to prevent conflicting information.
Benefits administration technology, including BAS’ MyEnroll360 platform, can help employers organize and maintain eligibility, enrollment, and coverage information. However, accurate administration depends on the timely exchange of complete and consistent information across all systems.
Establishing clear procedures for updating records, monitoring integrations, and periodically reconciling information can help prevent small discrepancies from becoming larger compliance problems.
ACA compliance is an ongoing responsibility, not simply an annual reporting exercise. Accurate and consistent information across payroll, HR, and benefits administration systems helps employers make appropriate coverage offers, maintain reliable records, and prepare accurate ACA reporting.
By keeping employee information aligned across all systems throughout the year, employers can reduce administrative errors, simplify annual reporting, and minimize potential ACA compliance risks.
Benefit Allocation Systems (BAS) provides online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 integrates with major insurance carriers for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and others), and with leading payroll platforms for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and others).
This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.