Why Your Payroll System Can’t Ensure ACA Compliance

November 16, 2021
Kahley Czupek
Timer  Read Time: 4 minutes

With the Affordable Care Act (ACA) deadlines approaching, now is a good time to make sure you have systems in place to help successfully complete reporting. Many companies and HR teams rely on their payroll software to take care of this for them, however that might not be the best way to ensure compliance. Whether you are in the market for a new solution or are looking to learn more about what your current technology can do for you, we’ve compiled the top reasons why ben admin is the most reliable way to ensure ACA compliance.

Benefits Shouldn’t Be an Afterthought

There is no denying that both payroll and ben admin systems are important to any HR team. Both platforms provide automation and convenience for large and/or complex companies. Some payroll systems even offer ben admin add-ons that allow HR teams to manage payroll hours, earnings and benefits all in one. As tempting as that sounds, in most cases it’s too good to be true.

Payroll system add-ons tend to be just that – an add-on (or an afterthought). Benefits are complex and require a flexible, intricate system to properly manage and automate them. When it comes to ACA reporting, having a separate platform dedicated to managing your benefits is paramount to ensuring your company remains compliant. Not only does it need to be able to reliably store key information, but have the flexibility to navigate multiple FEINs, various workflows, and both employer and employee reporting.

One Size Doesn’t Fit All

Payroll system benefit “add-ons” are typically cookie-cutter style modules that lack space for customization and configuration. However, benefits administration systems are designed with flexibility in mind to fit you and your company’s needs. This includes customizing what type of data is stored and how it is organized, which is key for a smooth ACA reporting season.
Payroll systems accurately maintain employee demographics, employee classifications, payroll hours and earnings. Your ben admin system can also track demographics and classifications as well as:

  • Benefit plan enrollment (including effective dates, term dates)
  • Benefit plan details (MV, etc.)
  • Plan Eligibility
  • Offers of coverage
  • Lowest cost of coverage
  • Conditional spouse coverage
  • Dependent demographics and enrollment

1095-C Forms require all this information, which goes far beyond strictly hours worked and earnings. This data is crucial to remaining compliant and avoiding costly penalties, so it bodes well for HR teams to rely on a system that stores the bulk of it and is flexible enough to handle ACA reporting as well.

Built For Communication

Payroll systems are highly internal, and their main functions don’t extend to communicating with other types of platforms or transmitting documentation to third parties. On the other hand, external transmission and communication are fundamental features of any benefits administration platform. Not only do they pull data from payroll systems for eligibility, but they also transmit information to and from carriers and employees as well. Although payroll systems with ben admin add-ons might boast these communication features as well, they typically aren’t as reliable as standalone ben admin systems since it isn’t a necessary function of the platform.

Being able to reliably receive and transmit information, data and documents is extremely important in ACA reporting. You need to be able to electronically report aggregate employer-level data on the Form 1094-C, assemble, preview and send Form 1095-C to eligible employees, and transmit these forms promptly to the IRS. The last thing HR wants to worry about is an unstable system miscommunicating information and becoming non-compliant. Instead, rely on a ben admin system that was built with this level of communication in mind.

Want to Learn More?

Learn more about all things ACA in our webinar 5 Ways Ben Admin Systems Streamline ACA Reporting & Compliance or schedule a product demo with our team today to see firsthand why ben admin systems ensure compliance.

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