Regardless of how employers choose to provide healthcare coverage to employees, there are matters of Affordable Care Act (ACA) compliance that must be attended to. One of them is ACA reporting. Companies must file compliance reports on an annual basis demonstrating that they are offering healthcare coverage to employees. But what about reporting during a merger or acquisition? Whose responsibility is it?
Unfortunately, the answer to this question is not simple. Reporting responsibilities ultimately fall on the company designated as the legal employer of the employees in question. But even at that, there are some nuances that could make figuring out who is responsible for ACA reporting a bit more challenging.
The First Calendar Year
Confusion over ACA reporting is most prevalent during that first calendar year. It is the year in which the merger or acquisition originally took place. Common sense would dictate that the acquiring company becomes the legal employer, thereby requiring it to handle reporting. But that may not be the case.
In the case of Applicable Large Employers (ALEs), they may still be required to handle reporting during the acquisition year even though they are the targets for acquisition. The chances of the reporting responsibility falling on an ALE increases when the company is part of a larger ALE group.
Should the acquiring company obtain at least an 80% equity interest in the target company, it is not uncommon to end up with situation in which the target company still handles reporting but the acquiring company is ultimately responsible for making sure that it gets done.
Sometimes Employees Are Considered New
There are some mergers and acquisitions that ultimately put ACA reporting on the acquiring company because the employees of the target company become new employees of the acquiring company. This normally occurs when the acquiring company only purchases the target company’s assets.
Under such a scenario, the acquiring company would be responsible for all ACA reporting from the date of acquisition onward. Any reporting required prior to the date of acquisition would be the responsibility of the target company. Note that this applies to coverage periods, not actual reporting deadlines.
Making Sense of It All
What we have described here is only the tip of the iceberg, so to speak. There is a lot more to understanding about ACA reporting during mergers and acquisitions. Making sense of it all can prove challenging even for the most experienced benefits administrators. But that’s the way it goes. ACA compliance is not an option; it’s a mandate and it needs to be handled one way or another.
It should be noted that ACA compliance is not limited only to traditional health plans. Even employer-sponsored, self-funded health plans must comply with reporting requirements. Things don’t change even if target or acquiring company utilizes a self-funded plan.
The Need to Get It Right
Needless to say that employers should do everything in their power to make sure they get reporting right. According to the ACA Times, the new year brings with it stiffer penalties for employers that do not maintain compliance. For example, the penalty for not providing a health plan with minimal essential coverage (MEC) increases this year to $2880 per employee for ALEs.
Companies struggling with ACA compliance issues should talk things over with their attorneys and accountants. And in the case of mergers and acquisitions, it is important to look into who bears responsibility for ACA reporting before the transaction actually takes place. Knowing ahead of time the responsibilities of each party can eliminate unnecessary compliance headaches so that the two companies can focus on ensuring a smooth transition.
