Staying compliant with the Affordable Care Act’s (ACA) Employer Mandate is essential to avoiding costly penalties, but how can organizations ensure they’re on the right track? With ACA reporting deadlines approaching for the 2024 tax year, now is the time to ensure you’re confident in your processes.
In this episode of RPI Tech Connect, Wendy Delgado-King, Senior Client Experience Consultant at ADP, breaks down key ACA compliance strategies, explaining how they apply in real-world scenarios. Plus, hear examples of compliance missteps, success stories, and practical guidance on navigating IRS penalties like Letter 226J.”
Tune in for expert insights to help your organization stay ahead of ACA requirements.
Interested in listening to this episode on another streaming platform? Check out our directories or watch the YouTube video below.
Meet Today’s Guest, Wendy Delgado-King
Wendy Delgado-King is on the Client Experience Team for ADP’s Health Care Reform (HCR) Team. In this role, Wendy focuses on elevating the client and associate experience through collecting insights, fostering engagement, and using feedback to enhance programs and practices across the business.
She works directly with HCR clients, HCR Senior Leaders, and with all functions throughout HCR and the ADP business. Wendy often speaks on the ACA and ADP Health Compliance’s proactive solutions.
Meet Your Host, Chris Arey
Chris Arey is a B2B marketing professional with nearly a decade of experience working in content creation, copywriting, SEO, website architecture, corporate branding, and social media. Beginning his career as an analyst before making a lateral move into marketing, he combines analytical thinking with creative flair—two fundamental qualities required in marketing.
With a Bachelor’s degree in English and certifications from the Digital Marketing Institute and HubSpot, Chris has spearheaded impactful content marketing initiatives, participated in corporate re-branding efforts, and collaborated with celebrity influencers. He has also worked with award-winning PR professionals to create unique, compelling campaigns that drove brand recognition and revenue growth for his previous employers.
Chris’ versatility is highlighted by his experience working across different industries, including HR, Tech, SaaS, and Consulting.
About RPI Tech Connect
RPI Tech Connect is the go-to podcast for catching up on the dynamic world of Enterprise Resource Planning (ERP). Join us as we discuss the future of ERPs, covering everything from best practices and organizational change to seamless cloud migration and optimizing applications. Plus, we’ll share predictions and insights of what to expect in the future world of ERPs.
RPI Tech Connect delivers relevant, valuable information in a digestible format. Through candid, genuine conversations and stories from the world of consulting, we aim to provide actionable steps to help you elevate your organization’s ERP. Whether you’re a seasoned professional or new to the ERP scene, our podcast ensures you’re well-equipped for success.
Tune in as we explore tips and tricks in the field of ERP consulting each week and subscribe to RPI Tech Connect below.
Transcript
Chris Arey
For large employers, staying on top of regulatory requirements is critical and ACA compliance is no exception. Today on RPI Tech Connect, we’re going to talk about best practices for minimizing ACA penalty risk to ensure that your filing season is a smooth one. Welcome back. I’m your host, Chris Arey. And today we’ve got a very exciting topic ahead of us and something I hold very near and dear to my heart: the Affordable Care Act, also known as the ACA.
Specifically, we’ll be talking about the employer mandate portion of the healthcare law. You know, it’s been in effect for over 10 years now, but organizations still struggle with compliance, whether that be with reporting, making offers of coverage, or ensuring that the coverage is affordable.
Today we’ll be talking about best practices for ensuring compliance and minimizing penalty risk, and to help us navigate that space, I’m pleased to welcome Wendy Delgado-King, a senior client experience at ADP. Wendy, welcome to the show.
Wendy Delgado-King
Hey, Chris. Thanks so much for having me. I’m excited to be here sharing insights on ACA compliance. Before we jump in, I’ll share a little bit about myself. I’ve been in compliance roles my entire professional career. And yes, to age myself a little bit, that’s been about 20 years or so.
I’ve been with ADP a little over eight years, all of which have been with the healthcare reform team, the part of ADP that offers a proactive ACA solution. I’ve been an account manager where I’ve supported clients in their compliance journey as well as a project manager where I focused on strategic business initiatives and business growth.
And then I moved into a hybrid role where I make key business and process improvements while maintaining close relationships with the clients themselves. Before we go any further, I just want to give a quick disclaimer that I’m not providing legal advice.
This isn’t the final word on today’s topic, nor is it voicing any political opinions. Before anyone takes action based on what I’m going to say today, I would advise that you consult with your legal counsel.
Chris Arey
Thank you for that, Wendy. And just a little bit of experience you have, it sounds like.
Wendy Delgado-King
Just a bit.
Chris Arey
Also, I think that was the first time we’ve had a legal disclaimer on RPI Tech Connect. So that’s a milestone for us. I appreciate you making that clear.
I think a great way to start our discussion today would be to talk about the employer mandate. What does it require and why is compliance so important?
Wendy Delgado-King
Thanks for taking it easy on me, right? Right off the bat. I mean, I’m sweating already.
Chris Arey
That’s not a loaded question at all.
Wendy Delgado-King
I’ll start by saying the ACA is an IRS regulation. And just like any employer tax regulations, the ACA should be treated with the same respect, attention, and urgency that you would treat those regulations.
In a nutshell, the employer shared responsibility provisions, which are also called the employer mandate, requires that applicable large employers or ALEs, (which are those companies that have 50 or more full-time and full-time equivalent employees), provide adequate coverage that is affordable and meets minimum value requirements for 95 % of their full-time employees.
For an employee to be considered full-time, they need to work 30 hours or more per week. The ACA includes penalties for employers who don’t offer health insurance coverage or who don’t offer that coverage that meets certain standards to eligible employees.
Employers who fail to comply on a timely basis or fail to properly document their compliance could face substantial financial penalties. Additionally, certain states have different reporting requirements, adding to the complexity of ACA legislation. As a result, you should focus on where an employer resides rather than where they work.
Employers should be hyper-aware of those employees that reside in said states, and I’ll share them with you just to be sure, California, New Jersey, Rhode Island, and Washington DC.
Something I did want to say as a side note; we’ve confirmed that New Jersey is still expecting forms to be filed for 2024 reporting, which are those ACA forms that you should have already completed or are getting completed in this early part of 2025. Based on recent information that we have, the other states have not confirmed if they’ll be making any changes this year, so I just wanted to put that out there.
Furthermore, companies who follow the ACA compliance rules and guidelines can reduce their potential penalty risk. They can streamline operations, improve employee morale overall, while also increasing their bottom line. All those things combine and prove their odds for long-term success and basically the opposite can be said for employers who do not have a strong ACA strategy in place.
Chris Arey
Got it. That was a lot of information you just shared there. Have there been developments with state reporting? You mentioned New Jersey is still expecting employers to file and others are not. What’s the story there?
Wendy Delgado-King
Right. So I mentioned that as a tidbit because there have been recent changes to some of the legislation here in the early part of the year, things that we should all be aware of.
I know this isn’t really related to the subject matter of this particular podcast, but I did want to mention it because we know those deadlines are quickly approaching. If you haven’t heard about the changes I just referenced, I would encourage you to go out and take a look, as there are a couple of things that are impacting the ACA.
Chris Arey
Well, thank you. I appreciate you sharing that. Let’s shift gears here a bit. I would love to hear about some of the organizations that you’ve worked with throughout your career.
You’ve had businesses on various ends of the spectrum here, from those that got compliance right the first time and others that unfortunately learned the hard way. Can you share any stories from your experience here where they face challenges due to non-compliance?
Wendy Delgado-King
That’s another great question. And yes, I’ve worked with clients across the compliance spectrum, meaning we’ve had some real stories.
The Affordable Care Act was designed to really encourage employers to provide timely, affordable, and appropriate health benefits to eligible employees. While this may sound basic in principle, it’s just the tip of the iceberg.
In reality, the ACA is very complex and requires multiple levels of data. When you take a moment to think about the number employees in an organization, the amount of data per employee, per month, per FEIN or entity is staggering, right?
Chris Arey
Yeah, that’s a lot. That’s a lot of people and a lot of different data found in different locations too, right?
Wendy Delgado-King
It is, it is, and it is truly a staggering. One of the biggest mistakes that we’ve seen is that employers are not taking the time each month to review their data. And I mean, that feels like a simple concept, but when you think about all those employees, it’s not, right?
They’re waiting until it’s time to submit their 1095s and their 1094s to consider ACA reporting. By that time, they’ve already missed their opportunities to course correct along the way.
Chris Arey
Yeah, waiting till last minute is never a good business strategy, I feel. And ACA reporting is no different, is that right?
Wendy Delgado-King
That’s it. Failure to monitor eligibility hours throughout the year can cause surprises when it comes to extending time re-offers. What could happen if you miss an offer, or multiple offers?
An employer could be issued a penalty. And the same could be said for failing to offer coverage that’s affordable and meets minimum value and to at least 95 % of those full-time employees. As you can see, there are a lot of ways in which you can wrap yourself up and be on the hook for a potential penalty.
Chris Arey
In those two different scenarios, is there ever a situation where an organization can get penalized for both failing to file and failing to offer coverage that’s affordable?
Wendy Delgado-King
Absolutely, there absolutely is. And that’s where the numbers really start to add up.
One thing that I have that I’ll share is that as a client first comes to you asking for help, initially, you’re only getting bits and pieces of the story. When we think about companies and penalty notices that they are issued, we should think about it as a story.
So, let’s get the information together. Let’s tell it to its fullest with all the details so that we can really understand what is happening. The employer did receive a penalty notice for failing to offer. So that employer had to go in and research the employees that were noted.
When doing so, they found out that while those employees were labeled as being part-time in their system of record, the employees were working well over that 30-hour average for an extended period, making them benefit-eligible.
Chris Arey
Now that oversight that happened in the system there, what can that be attributed to? Do you recall?
Wendy Delgado-King
Yeah, so it’s kind of tricky. In this case, they had multiple entities keying in information without big picture oversight. For example, from an HR perspective, a certain employee may be categorized as a part-time worker, but then front-line individuals within the company maintain that the hours they’re processing are well over that amount.
It’s almost like a case of the right hand not telling the left hand what’s going on, leading to that missed opportunity. As we get the story, as we put the pieces together, and as a result, employers are uncovering these issues internally and finding that they’re falling short and that there are opportunities to tighten some things up within the organization.
Chris Arey
Dang, and those penalties can get in like the million-dollar range or more.
Wendy Delgado-King
They can, they can. To me, it’s especially mind-boggling when you start thinking about your own personal finances and how much that something like that could really impact you. Long story short, this employer walked away knowing that they needed to implement some checks and balances within their organization.
Chris Arey
Yeah.
Wendy Delgado-King
They did have some tough lessons. And I think there’s something I want to note here, which is that since penalties are typically assessed with a two-year lag time, employers are making decisions today that will impact them and that they will have to substantiate and pay for potentially in the future. So, it’s a very big deal.
Chris Arey
Hmm, okay. So, if I’m hearing you correctly here, if an organization is filing for 2024 information now, there’s a chance they could be hit with a penalty upwards of two years from now?
Wendy Delgado-King
At least, at least. Even after the two-year mark for anything prior to 2024, you could be on the hook for a penalty several years down the road. So that is something to be aware of.
Some of those changes that I talked about earlier affect some of the related rules for the scenario we discussed, another reason to go out and look. Just know that the decisions you make today can come back around and impact you later.
This past week, we had a client that actually received a request for payment for an “A” penalty, which is the ACA penalty for failing to offer affordable minimum value coverage to at least 95 % of their full-time employees.
Unfortunately, that client didn’t have a copy of the original notice of the penalty. They didn’t get to the right person. We don’t know all the pieces of that story, but they didn’t have it.
So at the time of the infraction, they didn’t respond or craft anything. They didn’t reach out to the IRS. As a result, they received that request for payment, escalating the situation.
This notice is jarring, can be alarming, and may send you on a tailspin. Receiving a request for payment is when you really start to feel the escalation because it’s telling you what to do.
Chris Arey
So the correspondence started with something along the lines of hey, we believe that you didn’t offer adequate coverage to all qualified people for X tax year. You have an opportunity to show proof that you did otherwise.
They then lost that correspondence and received a follow-up letter that said, you need to pay us now. Is that right?
Wendy Delgado-King
Yes, yes, that is the request for payment. I’ll break this down for you. We’re going to do a quick little calculation here for what they received.
In their case, they had 3000 employees that they had to consider, which is kind of a small number for what we deal with routinely here.
Chris Arey
Sure.
Wendy Delgado-King
But, 3,000 is a decent amount. And for simple math, let’s take the 2025 penalty amount, which is $2,900. If you multiply 2,900 by the 3,000 employees by 12 months, since they did not offer minimum essential coverage for the entire year, they could be on the hook for over $8 million.
Chris Arey
Wow, what a nightmare. So when they got that, what kind of course correction could they have taken at that time? Do they just have to pay it?
Wendy Delgado-King
Yes, it is. That’s a lot of money. We’re actually working with them to see what options they have. Here internally, we have a team that handles a review process. They go through and look at all the data that you have in place. They help formulate a response with the information that you as the employer have on file.
So, we’re in the midst of all those steps. There are certainly opportunities to try to help mitigate the damage if you have the information to support the story.
Unfortunately, in this case, it doesn’t look like they do, so they’re potentially on the hook for that. This is an example of those decisions that you made years ago coming back to haunt you and it’s crazy to think about how quickly that small population of 3,000 employees has now come to this dollar amount.
Chris Arey
That’s a tough situation to be in and I’m sure that unfortunately, they must learn the hard way. I guess it’s better to learn later than never.
On the flip side though, what kind of stories can you share with us about organizations who have approached ACA compliance the right way, and what about their approach made them successful?
Wendy Delgado-King
Sure, you know, that’s kind of a scary story we talked about, but it’s not the norm. Most of the clients that we work with may need some level of support, right? But for the most part, you know, if you have a solid team and strategy in place, you’re going to succeed by making just minimal adjustments.
Those are some common things that we see in those organizations that succeed in compliance. And that could mean that they have in-house expertise or that they’re partnering with the vendor and working together on that strategy. It could be that the employer, you know, has that relationship and they’ve gotten penalties, but they’ve worked through them because they’ve kept a close watch, and they have a lot of data to assist them in that effort.
In a situation where you do have an employee that may go to the exchange or to the marketplace and qualify for a premium tax credit, you have the data to support your actions and you’re able to challenge any potential penalty notices. Like it’s not always a done deal, you know.
Chris Arey
I see. So, the premium tax credit there, you mentioned that, is that a key piece of the puzzle here for the IRS issuing penalties to organizations for ACA non-compliance?
Wendy Delgado-King
It is, it is a trigger. When we see those things coming through, that is typically the cause, right? So, to fix the issue, you must address the trigger for that penalty. If employers are constantly monitoring their benefit plans, they’re ensuring they meet minimum essential coverage, the minimum value, and that affordability threshold, the organization can better mitigate any of the risks that do come up.
Chris Arey
Got it. You shared two things there that I really love. I feel that if a given company is hyper-aware of the premium tax credit trigger, they can reverse engineer a strategy that is built upon that knowledge base.
They can make sure that all of their staff get offers of coverage on time and are not inclined to go get one from the marketplace.
With that knowledge, you can create a system and process that’s going to limit that kind of behavior.
My other takeaway is that the right way to approach ACA compliance and minimize the penalty risk is to take this like an ongoing process. It’s not as simple as, for example, tax season.
Every month, you take a moment to review your employee data to make sure that things line up correctly and that you’re keeping track of the hours. This is an ongoing process. Is that right?
Wendy Delgado-King
That’s right, absolutely. But you know, it’s almost like it’s one piece of the puzzle. There are several others like documentation, and that’s essential. I know I’ve said it before, but being able to tell the story or having the data is so important.
Knowing that the decisions you make today can impact you later, affects how you respond to anything from the IRS or those respective state agencies. You know, it’s almost like thanking past me for keeping all those records. Thanks to the future me for looking out for us.
Making sure that you’re able to see, retrieve and track the actions that you’ve taken around your ACA strategy is like the other piece to that. Again, being able to tell the story through the data and what you’ve done, then as you said, if you’re reverse engineering you’ve got a plan in place that you’re offering to employees as soon as they’re eligible.
This eliminates the question of, as an employee, should I not have benefits already? Should I go to the marketplace and take a look?
Well, no, because your employer has extended that offer to you. But like I said earlier, that doesn’t always stop a penalty notice from being issued.
You could have done everything you were supposed to as an employer and still have an employee go out to the market.
Chris Arey
Yeah.
Wendy Delgado-King
It’s just knowing or having that peace of mind that you’ve got your ducks in a row, that you could explain what happened, and be able to substantiate that you did offer when you were supposed to, which can take you off the hook for that potential penalty.
Chris Arey
Yeah, that’s an important piece there as well. If you claim to have offered the employee adequate coverage at the right time, the next question is going to be: do you have anything that proves it?
Because you’re going to need that. That’s a big part of this, right? You can’t just say, I know that we did that. You need documentation, whether it’s declination, enrollment, or some sort of form that proves that the penalty is being assessed in error.
Wendy Delgado-King
Right.
Yeah, know, annual compliance is something that you should be concerned with and something that you’re working towards all year.
So, you know, the steps to stay compliant should really be always top of mind and not something that’s just once a year.
At ADP, we like to say year-end is year-round here because we’re always like top of mind. Like that’s the end goal. The end goal is to create these forms with all of the correct data that aligns with you and your business practices, and to have them readily accessible all year-round.
Chris Arey
I love that. What was that tagline again?
Wendy Delgado-King
Year-end, year-round. We should have it posted everywhere here in the building because that truly is our mantra here.
Chris Arey
Yeah, that’s good. Have to live and die by that motto. Wendy, you’ve shared a ton of really helpful information with us today.
I appreciate you hanging out with me today. We are getting close to time, but before we wrap up, I always like to ask my guests if they could share one piece of advice regarding today’s topic. Today, that’s ACA compliance and avoiding penalties. What would you have to share there?
Wendy Delgado-King
Yeah, I would say save yourself a headache by reviewing and adjusting your data all year round, instead of waiting until January, when you’re thinking about getting those forms ready and transmitting and furnishing those to your employees.
Remember that the sooner you find data or business practice issues that put your organization at risk, the sooner you can minimize potential penalty risks.
It really is important to invest in the right tools and resources to support a strong ACA strategy. That can look different depending on where you are as an organization in your ACA journey.
I also want to just say, when you partner with vendors like RPI, or draw on the technology and expertise offered by ADP in the health compliance space, you have the support and systems to be proactively aware and vigilant all year.
There are lot of different benefits to having designated teams that can really help you focus on your needs and who understand your employee populations and your business practices. They can and will support you every step of the way throughout the year.
And know that when you have that partnership in place, you’re working proactively with your employees and their data to help stay ahead of IRS and state reporting deadlines, which further minimizes that potential penalty exposure.
So if you do receive a penalty, don’t panic. Remember there are a lot of tips, resources, and tools out there. And if you’ve done everything that we’ve suggested here and have monitored the situation and kept your necessary documentation, you should hopefully be able to resolve the problem.
Chris Arey
Awesome. And I just want to add for those of you listening in, if something like checking your data monthly sounds like something that you don’t have the resources to do, ADP and RPI are both great, great resources to help support that. Both make sure that you have an ACA compliance process in place and it’s going to ensure that when reporting season comes, you’re in a good spot.
So thank you, Wendy. And for those of you listening in, if you have any questions about what we’ve discussed today, or you want to learn more about ADP health compliance or how RPI can support you, we encourage you to reach out to us.
You can do so at podcast@rpic.com. Again, that’s podcast@rpic.com. This has been RPI Tech Connect, and we’ll see you next time. Thank you so much. See you, Wendy.
Wendy Delgado-King
Thank you, Chris. Thank you. See ya.
