ACA Compliance Confidence Remains Low for Large Employers

New research from ADP finds half of employers with 1,000 or more workers don't feel prepared to comply with all Patient Protection and Affordable Care Act regulations.

ADP’s new white paper, “Affordable Care Act and Employer Confidence: Navigating a Complex Compliance Challenge,” examines how large companies are approaching compliance with the Patient Protection and Affordable Care Act (ACA).

Among the nearly three-quarters of large employers (70%) that handle their compliance efforts internally, many do not feel fully prepared to manage several critical compliance requirements, including exchange notices (62% unprepared), ACA penalties (60%) and annual health care reporting such as IRS Forms 1094/1095-C (49%).

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“As we meet with large employers, it has become clear that many don’t have the systems or processes in place to meet ACA compliance requirements, highlighting a need for a cohesive internal effort and perhaps a third-party partner,” says Vic Saliterman, senior vice president at ADP. “With reporting requirements based on 2015 data and subsequent penalties going into effect in 2016, the decision to go it alone on ACA compliance could prove risky based on current levels of preparedness.”

To meet the new requirements, large employers are planning strategic work force management and cost containment actions. The ACA Excise Tax on high-value health care plans, which becomes effective in 2018, is leading many large employers to increase employees’ share of costs. Nearly two-thirds of large employers (63%) plan to shift more costs to their workers through changes to employee deductibles, employee co-pays or employer contributions. Roughly one-third of large employers have introduced a low actuarial value plan, and more than half of these (57%) have decided to offer a consumer-driven health plan (CDHP).

Rather than change employee hours in response to the ACA-mandated coverage for employees working more than 30 hours per week, 61% of large organizations have already or intend to extend benefits coverage to additional groups of employees beyond those working 40 hours per week. These companies cite talent acquisition, talent retention and avoiding penalties as their top reasons for doing so.

Most employers in the study offer coverage to all employees averaging at least 30 hours of service per week during the employer-defined measurement period. Only about two out of five large employers have limited or are planning to limit hours for some employees.

“The ACA has impacted many elements of work force management, including human resources, benefits, time, leaves of absence and payroll,” adds David Marini, division vice president and managing director, strategic advisory services at ADP. “As employers continue to work toward ACA compliance, they should consider forming cross-functional teams equipped with the right tools and expertise to monitor and record employee hours, the affordability of coverage and rising health care costs.”

The ADP Research Institute conducted its study in August and September 2014, and included input from 403 heads of HR, senior HR/benefits managers and executives who influence decisions regarding their company’s employee benefits policy, system and services in U.S. enterprises. The results were weighted to reflect the actual distribution of company size, region and industry within the U.S.

A full copy of the ADP white paper is available here

2014 Closed With Light DC Plan Trading

DC participant transfers favored equities in December.

Just 0.022% of total defined contribution (DC) plan assets traded in December 2014, with a slight majority of days (55%) favoring equities over fixed-income assets, Aon Hewitt data shows.

When participants made trades, they were most likely to sell out of premixed funds, small U.S. equity funds and company stock. The asset classes with the most inflows for the month were large U.S. equity, international funds, and balanced funds.

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After incorporating December’s contributions, trades, and market activity, the overall DC participant allocation to equities increased slightly from 66.0% in November to 66.4% in December, according to the Aon Hewitt 401(k) Index. Future contributions to equities decreased marginally month-over-month, from 66.3% to 66.1%.

U.S. equities posted mixed results during the last month of 2014. On the large-cap U.S. equity front, as measured by the S&P 500 Index, returns were negative at -0.3%. Small-cap equities outperformed their large-cap counterparts, with the Russell 2000 Index gaining 2.9% during the month.

The fixed-income market, as measured by the Barclays U.S. Aggregate Index, was flat, returning 0.1%. The MSCI All Country World ex-U.S. Index, a benchmark used to represent companies based in the developed markets outside of the U.S., had a poor showing in December, returning -3.6%.

Even with the low volume of activity in December, Aon Hewitt says the last quarter of 2014 was “easily the heaviest trading quarter of 2014,” featuring 11 of the 24 above-normal trade volume days that occurred during the year. Aon Hewitt defines a “normal” level of relative DC account transfer activity as when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Aon Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. Slightly more than half (52%) of all trading days for 2014 favored fixed-income funds.

The domestic equity markets performed well during the fourth quarter, Aon Hewitt says, as both the S&P 500 Index and the Russell 2000 Index posted positive results, returning 4.9% and 9.7%, respectively. U.S. bonds also posted positive results over the trailing three month period, as the Barclays Aggregate Index gained 1.8%. The MSCI All Country World ex-U.S. Index had a volatile quarter and returned -3.9% during the period.

Additional index results are reported here.

 

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