Affordable Health Care Act Requires One Solution for Human Capital
By John Orr, Ceridian
With the Affordable Care Act, employers’ new reality is here, right now — and contrasts starkly with the past: Retailers that run payroll, time and attendance, scheduling, and benefits administration the way they used to will probably run afoul of the Employer Mandate, also known as “Play or Pay.”
If the aforementioned applications run separately, they’re not real-time aware of each other. This means noncompliance with the ACA will only surface after the fact, when it is too late. And the cost of noncompliance is steep, going beyond stiff penalties. Failure to offer health coverage to employees who qualify for it will only erode hard-won goodwill with floor associates. When employee morale plummets, the effects on employee and customer experience alike can be catastrophic.
Complying with Play or Pay: A Crash Course
The steps to comply with the employer mandate are complex and would require their own article. For one thing, Play or Pay has an imposing glossary of terms — Applicable Large Employers (ALEs), Affordable, Hours of Service, Variable Hour Employee, Minimum Essential Coverage (MEC), and Full-Time Equivalents (FTEs) are just a few. Their definitions are available elsewhere. The terms and their meanings help to provide a comprehensive understanding of the law.
In short, ALEs need to make immediate arrangements to comply. Organizations employing 100 or more full-time employees and FTEs in 2014 will be subject to comply for plan years beginning on or after Jan. 1, 2015. In 2016, that number decreases to 50. Any employee that averages 30 or more service hours per week or 130 service hours per month qualifies for MEC that ACA rules deem affordable.
The ACA prescribes specific methodologies to measure these hours. Finally, Sections 6055 and 6056 reporting, akin to W-2 reporting in the burden it places on business, gives the Internal Revenue Service the ability to determine whether businesses are complying. Most ALEs with status quo technology for human capital management will not be able to comply.
In complying with Play or Pay, a tapestry of variables makes the margin for error thin to nonexistent. Especially in retail, where floor associates’ schedules have a tendency to vary greatly from week to week, precision in tracking employees’ hours is necessary.
Compliance with the Employer Mandate means you must determine which employees qualify for MEC, and when — without fail. ALEs must continually categorize employees under different timelines or dating milestones. Furthermore, to complete forms necessary for reporting, employers need a verifiable eligibility trail and clear documentation reflecting all employment and benefits decisions, including when they were made.
Legacy systems for HCM just can’t do this. They run different platforms for the elements of HCM affecting ACA compliance. Even if a solution resides in the cloud, it may still run payroll, time and attendance, and benefits administration on more than one platform or across many disparate applications that are not real-time aware of each other.
Interfaces between these platforms slow or skew the movement of data between the elements of HCM affecting ACA compliance. Furthermore, these solutions may not be delivered via software-as-a-service (SaaS), either, and if not, this scenario combines with the lack of a single application to make changes and upgrades painful, cumbersome, and time consuming — and the results fragile in nature.
Retailers that hope to comply with the Employer Mandate must migrate to a single, SaaS-delivered application for these elements of HCM. Having just one data set means information moves freely between payroll, time and attendance, and benefits administration with guaranteed accuracy. Only a single application can deliver a single point of access to one source of the truth on data. Only a single application can make calculations of all these functions’ data in a single instance to produce the real-time view necessary for Play or Pay compliance.
Take the tracking of work hours, for instance. A single application seamlessly and immediately reflects changes in working hours everywhere their impact affects ACA compliance in payroll, time and attendance, planning, scheduling, and benefits administration. Turning to this information, managers can adjust employees’ schedules quickly to configure, plan and track, and comply properly.
Real-time ACA Compliance
The cost of noncompliance with Play or Pay can be debilitating. Fines reach into the thousands per employee affected. For large retailers, this can potentially total millions of dollars. And then there is the additionally potential blow to relationships with employees, which negatively impacts productivity and the overall customer experience. Retailers that obtain HCM solutions up for the task of ACA compliance will have made a wise decision.
John Orr is senior VP, retail strategy & execution at Ceridian.