The Devil is in the Details: Advising Your Clients on the Affordable Care Act

by LeClairRyan

The Affordable Care Act (ACA) represents a fundamental shift in healthcare delivery and insurance. The law is complex and many of its provisions are delayed due to implementation difficulties. However, virtually all businesses will be affected by the ACA; small businesses need advice on compliance, reporting and implementation issues. CPAs are in a unique position to understand the client’s business differently than insurance and payroll consultants. Take time to develop your ACA expertise now, so that you can better serve your clients.

In providing consulting services under the ACA, it’s helpful to think of businesses in three distinct groups:

1. Employers with over 100 employees typically provided employee health insurance prior to the ACA, often via self-insured plans or participation in multi-employer plans under collective bargaining agreements. These plans face unique challenges under the ACA. Employers need to understand how to ensure their plans are compliant, and that their timekeeping and payroll systems capture the right data for upcoming reporting obligations.

This group is also vulnerable to litigation over wage and hour claims, ACA claims and other fiduciary claims, including class actions. Employers in controlled groups are obligated to report individually.

2. Employers with more than 50 full-time employees, but fewer than 100 employees, are a diverse group that may already provide some health insurance coverage. While businesses in this group realize the ACA impacts them, they may not realize the full extent of their obligations.

They may be exploring different options for coverage, including self-insurance.

3. Employers with fewer than 50 full-time employees often believe they are not required to comply with the ACA employer mandate because of their size. However, there  are employers in this group who could be subjected to the employer mandate. As a CPA, your small business clients will rely on you to analyze risks and advise on the best ways to deal with them.

This group may also have independent contractors who could be reclassified as employees. If that happens, there could be ACA penalties and claims by employees for failing to offer health insurance and other benefit plans. Even employers who could qualify for Section 530 relief in classification issues, based on industry practice, may be ineligible for relief because the business fails to issue a 1099. Both the IRS and state unemployment agencies are increasing enforcement in the employee classification area. An alert CPA can prevent a host of problems for those businesses.

Potential Pitfalls
There are six areas of concern that CPAs should be prepared to handle:

Time keeping. Employers are vulnerable to wage and hour claims for overtime. Often this is an evidentiary issue of the employee’s records of time worked versus an employer’s timekeeping records. With the ACA’s definition of full-time as a 30-hour work week, the issue of timekeeping is more important. CPAs are well-positioned to advise businesses on the quality of internal controls.

Payroll. Many small businesses do their own payroll, often using QuickBooks payroll type programs. While the QuickBooks payroll program is flexible, it is potentially a weapon of mass destruction in the hands of an untrained bookkeeper. Many CPAs find the bookkeeper has inputted incorrect rate information, leading to under withholding or underpayment of taxes. Errors and vulnerabilities in the payroll arena are magnified under the ACA with increased reporting obligations imposed both in W-2 reporting and the new Form 1095.

Unclear aggregation rules. Smaller employers may not be aware of the aggregation rules that may apply to commonly owned or commonly managed entities. Separate  employers can be aggregated for certain purposes, like determining whether the employer has 50 or more full-time equivalent employees. As the application of the aggregation rules in the ACA is unclear, this is an area of concern where restructuring may be advisable.

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Source: Sum News (Spring 2014)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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