Tag Archives: cobra

14 Things to Know About ACA Software

If you are a large employer or employee benefit broker, chances are you have spent a lot of time trying to determine the best ACA 6056 reporting and compliance solution. At ACA Reporting Service, we do not sell software – rather, full-service reporting. However, we have researched almost a dozen different Affordable Care Act employer reporting and compliance vendors, and we thought we would pass along what we learned.

Beginning Questions to Ask Yourself

As an employer or benefit broker, this is how the ACA software question breaks down for you.

1). Some employers will have their online enrollment (benefits administration) and payroll with the same vendor. In those cases, as long as the client is willing to pay for it, it will likely to make sense to just perform this required ACA reporting of IRS forms 1094 and 1095 with that vendor.

2). Some employers will not have an outside benefits administration vendor or payroll. They do everything in-house. For these employers, there is going to be a lot of ACA work to be done, and obviously you will need a stand-alone solution.

3). Finally, you have some employers that have payroll and benefits administration with different vendors. This would include the scenario where one of these functions is performed in-house. In these cases, you will either need to consolidate both payroll and benefit plan elections with one vendor, or you will need a stand-alone solution.

Basic conclusion: If you are an employee benefit broker with various types of employer clients, we don’t see a scenario where you can get away without having a stand-alone ACA software solution to help your clients meet their 6056 Affordable Care Act employer reporting requirements.

What do you need to know in evaluating ACA stand-alone software vendors? Here are some questions to ask yourself:

1). Security? What if all the Social Security numbers of your client’s employees were stolen? Can you imagine the fallout? Many of the systems we reviewed were severely lacking in terms of security. What level of encryption is being used for the data?

2). Branded to your company? Many different ACA reporting vendors offer the ability to brand a portal to your company and let your employer clients log in.

3). Is the system mainly a benefits administration system? This can make an extreme difference. Will this add costs for the ACA reporting module? Also, with many benefits administration systems, there are additional charges for EDI (electronic data interface – where election data is sent to insurance carriers). Will additional fees apply with this new ACA reporting?

4). Is the ACA reporting solution even built yet? Many, MANY of the ACA reporting module demos we sat in on were from vendors that do not even have the software built yet.

5). How long will your data be stored? The IRS has said that audits will begin starting in about 18 months of filings, and that can last for 7 years total. If you do not have a methodology to get back to your data at the time of inquiry, you are stuck.

6). Is your vendor set up to file with the IRS? Did they just lie to you and say yes to that question? As of the writing of this blog, no one is set up to file with the IRS electronically (efile) for forms 1094 and 1095. The IRS has literally just issued the guidelines to begin getting started with this.

7). Variable hour tracking? Do you need variable hour tracking to determine eligibility? For many employers, a simple spreadsheet will do the trick. Many vendors have quite robust capabilities in this area, and for some employers this will definitely make sense.

8). The “Gotcha Moment.” This comes at the end of a great presentation when you’re told there is an additional charge of $3 to $5 per employee to file the forms with the IRS. Generally, these costs will render noncompetitive whatever solution you were just shown.

9). Robust ACA logic? We cannot tell you how important this is! If you have spent as much time looking at these forms as we have (especially in terms of form 1095c lines 14, 15 and 16), you will know that performing this reporting is MUCH MORE than just uploading a spreadsheet. The codes for these lines are based on logic. Most systems do not have this logic built into their system, so it will be up to you as an employer or benefit broker to figure this out. For most employee benefit agencies, you can count on this little “bug” shutting down your operations in January.

What if you decide to just file them incorrectly? When your largest client has 100 employees bring them letters from the IRS, you will then realize this was a very bad idea.

Also, without robust logic built into the system, there will be no accommodation for situations such as someone terminating in November/December and then electing COBRA in January. The codes for these situations are different.

10). Are forms stored for future access and corrections? Bottom line – there are going to be issues with the reporting from time to time. Do you have the ability to go back into the system and create a new/corrected 1094 or 1095 form on behalf of the employee? Many systems that rely solely on a census upload would require you to basically start over to make this one fix. OR, your staff can just manually create one in .pdf, which will take a lot of time.

11). Do you have to pay for the whole system up front, or are there monthly options? Do you need to commit to multiple years with the software vendor? Do you have to pay continually for the solution or only once? Are there implementation costs? Are there separate fees for the IRS form file reporting and all other functions in the system?

12). Can the employee elections be uploaded via census, or do you need to type it all in?

13). Will the vendor have adequate customer support between Jan. 1 and Jan. 31 so that you can KNOW you will be able to get all the work done?

14). Do you want to just let the payroll vendor do the work for your client? Do you really want to recommend that your client have another function performed by someone who wants nothing more than to take your business away from you?

. . . OK, that is enough! We hope you find this helpful.

A Catch-22 on Hiring the Disabled

In the Missouri Court of Appeals' recent decision in Stewart v. Second Injury Fund, the facts were not in dispute: Ms. Stewart worked at Subway for a few months, suffered a moderately severe injury at work and could not return to any type of employment.

Here’s where the story becomes interesting: The claimant qualified for Social Security disability in 1997 — more than 10 years before she started working at Subway. 

Her Social Security disability was awarded based on confirmed medical conditions including arthritis, reflex sympathetic dystrophy, degenerative joint and bone disease and carpal tunnel syndrome. She continued to receive Social Security disability benefits even while she was working at Subway.

After her work injury in 2009, she filed for workers' compensation benefits, claiming that she was permanently and totally disabled.

Was the claimant permanently and totally disabled before her injury at Subway? Apparently not, because she was able to obtain that job and perform the duties associated with that job. In the absence of her injury, she would have presumably been able to continue working. 

Why would she be entitled to Social Security disability benefits if she was able to compete in the open labor market? If she was disabled in 1997, should she be entitled to more benefits when she was injured at a job that she should not have been able to obtain?

What if Subway had told the claimant during her initial job interview that she could not be hired because of her multiple disabilities? She could have sued Subway under the Americans with Disabilities Act, arguing that Subway was discriminating against her. Subway, not wanting to be sued, could have been forced to hire the claimant only to face the prospect of being liable for permanent total disability after only a few months of work.

I’m not attempting to disparage the claimant. She obtained benefits that are legally provided. My question is this: Is it fair to place employers in no-win situations where they face litigation if the employee is not hired, yet still face litigation if the employee IS hired?

This situation arises because of the myriad of state and federal laws that regulate every facet of the workplace. Every employer must wade through an alphabet soup of overlapping laws every single day (ADA, FMLA, COBRA, EFCA, EAD, ERISA, FLSA, FCRA, INA and a host of others). 

One cannot swing the proverbial dead cat without hitting five politicians giving a speech focused on creating jobs. Yet, can jobs be created by strangling the very companies that create these jobs?

The Real Fiscal Cliff – Not the Puny One in the News Today

Medicare and Social Security are in deep trouble — deep trouble. The nominal national debt is puny compared to the unfunded liabilities in Medicare and Social Security. How does $16T — yes “T” as in trillion — compare to $86T? There is a good article in the Wall Street Journal written by Chris Cox and Bill Archer. Click here to read the full article.

Historically, the government has had success in transferring these types of liabilities to the private sector. One way was to deliberately underpay doctors and hospitals under Medicare with the full expectation that those shortfalls would be absorbed by private payers. In my career I had discussions with the Centers for Medicare and Medicaid Services about that very thing. One Centers for Medicare and Medicaid Services official admitted that was part of their strategy. He also said that would continue as long as private payers were willing to absorb the Medicare underpayments to providers. That has worked so far.

Another example was when the government declared that private group plans would be primary over Medicare for workers over age 65. For those of you too young to remember, that was not always the case.

One possible big transfer of Medicare costs to the private sector would be to declare that companies have to offer COBRA for five years or so for every employee age 65 and up who terminates employment. I guarantee you that type of transfer to private companies will be “on the table.”

For those of you benefit managers who are in the first half of your career, you will be facing measures not unlike ones I’ve described here. Brace yourselves.

Don’t Pick Up COBRA As Part of Your Next Deal

Recently, we have received a number of questions from business lawyers and their clients regarding the responsibilities of the parties in an acquisition transaction (i.e., a stock sale or an asset sale) under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). As you probably know, COBRA requires many group health plans to offer to current participants and their beneficiaries the ability to continue coverage under the plan after certain qualifying events occur that would otherwise result in the termination of an individual’s coverage. Here is an overview of how the COBRA rules work in an acquisition.

Questions That Need To Be Asked
In general, these are the questions that need to be asked and considered:

  1. Has there been a stock sale or an asset sale?
  2. If so, who (if anyone) has had a COBRA qualifying event?
  3. If there has been a COBRA qualifying event, which employer is responsible for providing COBRA continuation coverage?

Stock Sale Or Asset Sale?
The Treasury regulations governing this area are phrased in terms of stock sales and asset sales. A stock sale is a transfer of stock in a corporation that causes the corporation to become a different “employer” taking into account the controlled group rules. For example, if Corporation A owns 100% of Corporation B and sells its stock in Corporation B to Corporation C (that is not related to Corporation A), a stock sale has occurred because Corporation B ceases to be a member of Corporation A’s controlled group and becomes a member of Corporation C’s controlled group. An asset sale is a transfer of substantial assets, such as a plan or division or substantially all the assets of a trade or business.

M&A Qualified Beneficiaries
If either a stock sale or an asset sale has occurred, we must identify the group of individuals who must be offered COBRA continuation coverage — the so-called “M&A qualified beneficiaries.” An “M&A qualified beneficiary” is a qualified beneficiary whose qualifying event occurred prior to or in connection with the sale and who is, or whose qualifying event occurred in connection with, a covered employee whose last employment prior to the qualifying event was associated with:

  • The acquired organization in the case of a stock sale; or
  • The assets being sold in the case of an asset sale.

Qualifying Event
Once we have identified the M&A qualified beneficiaries, we must determine if they have experienced a qualifying event. COBRA continuation coverage need not be offered to an M&A qualified beneficiary unless the individual has had a COBRA qualifying event. In the case of a stock sale, the sale itself is not a COBRA qualifying event if the employee of the acquired organization continues to be employed by the acquired organization after the sale (even if the employee is no longer provided with group health plan coverage after the sale).

However, an asset sale results in a qualifying event with respect to a covered employee whose employment was associated with the purchased assets unless either (i) the buying group is a “successor employer” (see below) and the employee is employed by the buying group immediately after the sale, or (ii) the covered employee does not lose coverage under a group health plan of the selling group after the sale.

A “successor employer” is an employer that falls into one of the following categories:

  1. It continues the business operations associated with the purchased assets without interruption or substantial change;
  2. It results from a consolidation, merger or similar restructuring of the employer; or
  3. It is a mere continuation of the employer.

Who Is Responsible?
If an M&A qualified beneficiary has had a COBRA qualifying event in connection with a stock sale or an asset sale, we must then determine which employer is responsible for providing COBRA continuation coverage. The “employer” that is responsible is either the “selling group” or the “buying group.”

The selling group is the controlled group that either (i) includes the corporation being acquired in a stock sale or (ii) includes the trade or business that is selling the assets in an asset sale. The buying group is the controlled group that either (i) includes the corporation that has been acquired in a stock sale or (ii) includes the trade or business that is buying the assets in an asset sale.

If the selling group continues to maintain a group health plan, the selling group has the responsibility for making COBRA continuation coverage available to the M&A qualified beneficiaries. If, however, the selling group does not continue to maintain a group health plan in connection with the sale (a question of fact), the result depends on whether the acquisition transaction was a stock sale or an asset sale:

    If it was a stock sale, a group health plan maintained by the buying group has the responsibility for making COBRA continuation coverage available to the M&A qualified beneficiaries.

  • If it was an asset sale, a group health plan maintained by the buying group has the responsibility for making COBRA continuation coverage available to the M&A qualified beneficiaries only if the buying group continues the business operations associated with the assets without interruption or substantial change.

Can You Negotiate Your Way Out Of COBRA Responsibility?
The seller and the buyer can allocate by contract the responsibility to make COBRA continuation coverage available to the M&A qualified beneficiaries. However, if the responsible party under the contract fails to perform, the party described above continues to have the responsibility for making COBRA continuation coverage available to the M&A qualified beneficiaries.

What To Do?
First, each employer should determine if its group health plans are subject to COBRA. If they are, the parties should decide how COBRA is going to be handled and make it part of the purchase agreement. If you need help with your COBRA obligations, please contact me.