Adam: I think, like with so many things, it’s just knowledge. The Affordable Care Act is really a different animal. HR professionals weren’t trained for this, nor are accountants or lawyers; the ACA doesn’t fit neatly into any of those areas and it’s not always intuitive.
BIR: So being that it is kind of convoluted which, as we know with the government, things can be that way. How do you solve that? How do you help them to navigate that piece of the ACA puzzle?
Adam: Well it starts with one of the biggest misconceptions which is that most think the ACA reporting is an accounting process when it’s actually closer to a record-keeping process. Yes there are accounting aspects of it and the responsibility typically falls in the lap of an accountant or an HR administrator. But this is about having very specific legal knowledge, applying it to a staff with frequently changing circumstances and recording all those details on a monthly basis. So it’s not just offering Fred insurance in January and checking a box on a government form the next year. You really have to stay ahead of the process, to make sure you’re making those offers on time, tracking the information accurately and to make sure you’re in compliance with all the requirements.
BIR: Absolutely it makes a lot of sense. So what would you say is one of the biggest pitfalls that businesses may not be aware of?
Adam: They’re probably not aware of the common ownership issue. That’s where the law says if you own multiple businesses and an employee works for more than one, their hours must be combined for the purposes of identifying them as a full-time or part-time employee. This is done to prevent splitting large companies into smaller ones or having Sally work 16 hours a week at one company and 16 at another. A common ownership rules make it clear that this employee is considered full-time by the IRS. So you can’t get around it. They’ve closed up all those loopholes.
BIR: Gotcha. Do you have an example of how businesses deal with common ownership. It sounds like you’ve had to deal with this issue multiple times?
Adam: Oh absolutely. We have a lot of business owners who own multiple businesses but one of the most common issues we see is where clients who own franchise restaurants. And many times an individual or group will own five to twenty of them in a region and some employees are scheduled among two or three franchises in the group. So monitoring the turnover and status of variable hour employees can be a challenge to begin with. And it’s compounded in this industry where employees trade shifts and you have turnover and everything else that goes with it. So this is the point where counting on separate management staffs and using homemade spreadsheets or internal solutions to identify who just became full-time and needs an offer of coverage within thirty days simply doesn’t cut it. The IRS penalties are just too severe to let it slip through the cracks, so you need something, a system, that can talk to each other and consolidate everything. So our software has a level of integration that consolidates an employee’s hours across multiple companies and is also intelligent enough to handle the complex reporting rules affected by common ownership. There’s actually a bizarre case for reporting for these employees where the IRS wants you to submit a separate 1095-c form from each company. But for each month, you only use the actual codes for the location where they worked the most that month and all other locations essentially treat the employee is not employed for that month. And you repeat this for all 12 months of the year, going back and forth depending where they spend most of their time. So doing this by hand would be just awful.
BIR: Yeah that’s a paperwork nightmare.
Adam: And these business are playing hopscotch with it because they have to look every month to see where their employee worked most of their hours and then you report for them from that company but not the others but you have to still have to return a 1095-c for the others but since they didn’t work there for that month. So it makes you wonder what our lawmakers are doing sometimes.
BIR: It does, it definitely makes you wonder. So really sounds like that not only does Passport Software cover all these other aspects of business software and automation with keeping the data flowing and not duplicating effort and data entry. But you’ve now taken that one step further with the ACA and created a solution that navigates all the craziness and the pitfalls. And like you just shared in that example, where a business has to bounce around between different forms and different locations based on number of hours… talk about moving parts and moving variables. And yet, you’ve put it all together in a package that manages it for them so they don’t have to have this crazy nightmare looming over them every single month to try to make sure that they don’t get huge penalties and slapped by the IRS and God knows what other things they have cooked up if they don’t do it the right way.
Adam: Yeah absolutely. And I think you’re aware that I just did an article on the part two codes for the 1095-c in talking about the multi location, common ownership consolidation that’s might be the most confusing but it doesn’t affect everybody, the part two stuff affects everybody. So you definitely want to familiarize yourself or be aware of what all those codes and what those even the contribution amount which sounds like a straightforward thing but in practice it really is a little misleading. So you want to make sure you’re prepared to do that.
BIR: For our readers that may not be familiar with part two, can you shed a little light on that since you just did an article on that?