As the dust has begun to settle on Y1 of ACA, we have invested considerable time debriefing with vendors, clients, and brokers to understand what went well, what didn’t go so well, and how can we, collectively, help ensure a better outcome for Y2 of ACA. While we continue to gather information and data, we wanted to share with you our preliminary report card for 2015 ACA Reporting. As we have from the beginning, we have grouped the ACA providers into three distinct buckets and will summarize and share our viewpoints using that same grouping: Human Capital Management providers (ADP, e.g.), Benefits Administration providers (PlanSource, e.g.), and Stand-alone ACA Reporting providers (Health e(fx), e.g.). Below is our summary of Y1 ACA Reporting, providing an overall market review and grade, as well as each of the above 3 provider groupings. Overall Marketplace: Across the board, Y1 ACA Reporting was a challenge. 2015 ACA Reporting represented the single largest IRS reporting requirement since the introduction of Form W2 over 70 years ago. It would not have taken a rocket scientist to predict that a new (and quite complex) IRS form, required submission by millions of employers, and wrapped within polarizing legislation would yield a less than positive result. While we absolutely kept these facts in mind as we surveyed the market and factored in relativity, we also acknowledged that brokers and employers were asked to pony up and pay significant dollars for these services and, candidly, expected more than they received. As you’ll read in the specific provider group summaries below, the single greatest challenge for the marketplace providers was, as we predicted throughout 2015, data. Whether it was data that was native to a particular platform or data that needed to be imported/converted, data issues were at the root of many client’s (and provider’s) dissatisfaction. The amount of data that was required to produce Form 1095 was enormous. The marketplace did not do themselves any favors, however, when countless vendors stated, out loud and in sales meetings, “we will take any data in any format from any provider”. This was the proverbial Kiss of Death as this commitment was thin and more often than not, an unreachable target. Data was the #1 source of frustration – whether it was formatting, lack of cleanliness, inability to produce, or migrating across several platforms. Overall Marketplace Grade: C. Too much over-promising, and under-delivering unfortunately. Benefits Administration Providers: Generally speaking, Ben Admin companies fared the best in terms of producing the required ACA Forms as compared to the other two industry providers. That said, the variance of grades within this industry grouping was dramatic. There were a few companies that graded out at a B+, but there were also several providers that received an F – those that really failed this process for various reasons. From the beginning, we were bullish on the abilities of the ben admin companies to successfully produce Forms 1094 & 1095 because of the nature of the data that resided within their database and the fact that they specialize in benefits. This was not a foreign concept to them. They already knew and understood eligibility, offers of coverage, and had been tracking that data within their system for years. The primary obstacle they had to overcome was the fact that they had never, ever reported any data to the IRS. Again, the vast majority of providers performed well in this regard, while a few really struggled. Benefits Administration Providers Grade: B Stand-alone ACA Reporting Providers: As with any legislation, a new industry emerged from the complexities of the Affordable Care Act. The value prop for these stand-alone vendors is that they are ‘platform agnostic’ – they do not care with whom you partner for payroll, benefits, etc. They built their platforms to integrate disparate data from multiple sources to produce the ACA forms. Generally speaking, these systems were well-conceived and many of them provided a great option for companies that had in-house payroll or had multiple providers for payroll, benefits, etc. The details within these systems were generally strong and intuitive. Their challenge was rooted in data. In most every situation when an employer utilized the services of a stand-alone ACA reporting provider, their #1 pain point was around data – getting the data from the various systems into a useable format, ensuring quality of data, and constantly having to review detailed reports to validate data. We also witnessed some degree of variability with these service providers, but not quite to the extent of Ben Admin companies. We haven’t yet come across any stand-alone providers that failed (grade of F), but some were close. Stand-alone ACA Reporting Providers Grade: C+ Payroll/HCM Providers: Unfortunate for most employers, the Payroll/HCM industry scored the lowest as compared to the other two. I say unfortunate because this industry likely received the lion’s share of business for 2015 reporting. Opting to leverage a Payroll/HCM provider was generally considered the path of least resistance – mostly due to their ownership of data and their historical experience in filing forms with the IRS. That said, we anticipated some of the struggle for payroll companies that did not have a benefits admin solution baked into their solution. Those companies simply didn’t have native data that could easily be accessed to produce the forms. The other struggle that this industry experienced was volume. They simply took on too much business and lacked an adequate level of experienced staffing to fulfill the client/market need. Too often, we heard from clients that were on hold with their payroll company for an hour, waiting for someone to help them. Similarly, we heard from many clients that the experience level of the people supporting them was inadequate (as were many of their inaccurate responses). The last area of challenge employers faced was the timing that was provided to them to review/approve. Oftentimes, for the reasons noted above, employers were provided with their forms to review/approve — within 2 days of needing to go to print. One can only imagine the timing challenges had the IRS not provided us with the 2015 Christmas gift of a March 31 extension. The overall ACA reporting experience for companies that leveraged their payroll/HCM provider was even lower than expected, unfortunately. They have the largest hill to climb for Y2. Payroll/HCM Providers Grade: C- It is our firm belief that Y2 will show an improvement over Y1 in terms of process, quality, responsiveness, and satisfaction. That said, there will be some casualties along the way and our hope is that those that performed well in Y1 will further enhance their solution and those that struggled will either fold up their tents or make significant improvements.
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