Human Resource & Payroll Services And Solutions - Houston, Dallas, Austin - Texas www.hrp.net. Employers subject to the Affordable Care Act's "pay-or-play" provisions that take effect in 2014 will soon be running short on time to decide which path to choose. The choice involves human resource strategy as well as financial considerations. Here's an overview of elements that may guide the decision.

1. Toll Free: 877.880.4477
Phone: 281.880.6525
www.hrp.net
Coming to Grips with the Health Benefits
'Pay or Play' Decision

2. The first question an employer needs to resolve is whether or not it has
enough employees to be subject to the pay-or-play requirement (also
known as the employer "shared responsibility" requirement). The simple
definition -- employers with 50 or more full-time equivalent workers --
doesn't provide the full answer.
www.hrp.net
»
»
»
First, "full-time equivalent" (FTE) covers employees who average 30 (not
40) hours per week. The time period during which the employee count is
determined is the prior year -- in other words, 2013, for purposes of
whether you'll face the mandate in 2014.
Note: The IRS, recognizing that determining FTE status can become
complicated based on timing issues and seasonal work patterns, issued
some "safe harbor" rules last year to help with the determination. (IRS
Notice 2012-58)

3. Attempting an End-Run?
www.hrp.net
»
»
Also, the law attempts to discourage employers near to that 50 FTE
threshold to drop below it by cutting back employees' hours to less than
30 so that they flunk the FTE test. It does so by requiring that you add up
all of the hours worked by part-time workers over the course of a month,
then dividing that number by 120. The number that results from that
calculation is added to your FTE total to determine where you are in
relation to the 50 FTE minimum.
Note: Even if the calculation
determines that you are subject to
the pay-or-play requirement, you
are not obligated to provide health
benefits to part-time employees.

4. Some employers could, in theory, lay off a requisite number of employees to
fall below the 50 FTE threshold, and deal with them as independent
contractors. But simply calling a worker an independent contractor doesn't
necessarily make him so, of course. Independent contractor status is
somewhat subjective and determined by a multi-pronged test.
www.hrp.net
»
» Assuming you are subject to those "shared responsibility" provisions, and
even if you are already providing some level of health benefits, you'll need to
determine whether your benefit package provides at least 95 percent of your
employees a benefit package that meets "minimum essential coverage"
standards (the fine points remain a work in progress). If the answer is no, and
you don't beef up your benefits, the "pay" requirement kicks in. (This of
course would also be true if you didn't offer any health plan.)
According to the law firm Lindquist Vennum, in simple terms, the penalty is
the annualized equivalent of $2,000 a year for each full-time employee,
minus up to 30 employees, if at least one full-time employee signs up for
health benefits through a health exchange "and receives a premium tax
credit or cost-sharing reduction from the government."
»

5. Passing the "Value" Test
www.hrp.net
»
»
But even if you are providing minimum essential coverage to enough
employees, another hurdle you have to clear is whether the employee
receives a minimum value for that coverage.
That essentially requires that you are paying at least 60 percent of the
cost of the benefit. A parallel test is whether the employee cost is
deemed "affordable" to the employee. A "safe harbor" standard is
whether or not it exceeds 9.5 percent of the employee's household
income.

6. If either the "value" test or the affordability test is not met, something
called a "Subsection (b) penalty" kicks in. It is calculated as $250 per
month for each FTE employee who enrolls in a health exchange and is
eligible, based on income, to receive federal tax credits.
www.hrp.net
Eligibility for tax credit and subsidies ends at 400 percent of the U.S.
official poverty level. Eligibility starts once an individual, who does not
have access to a qualified affordable plan through employment, is
deemed to be able to afford insurance with an exchange credit
(approximately 100 percent of the poverty level).
If you determine that based on your current health benefits package you
won't meet the employer responsibility standards of the Affordable Care
Act next year, the financial dimension of the decision you'll face is
whether it's cheaper to drop benefits and pay the penalty, or improve
benefits to meet the requirements. In many circumstances the penalty
would be cheaper.
»
»
»

7. Don't Neglect Human Resource Strategy
www.hrp.net
But what about the human resource strategy considerations? Basic
questions include the impact on employee morale, as well as how critical
health benefits are to your ability to recruit strong talent. You may already
be exceeding ACA's requirements -- and employees may consider it a fair
substitute for higher wages.

8. Tax considerations also can play a role. If you were to drop health
benefits and simply pay employees more so they can go out and secure
their own health benefits via a health care exchange, that added
compensation is taxable to them, unlike the value employer provided
health benefits (assuming it falls below so-called "Cadillac" benefit levels).
Also the penalties you would pay, unlike the cost of providing health
benefits, would not be tax deductible for your company.
Finally, a decision to maintain a health
benefit plan that's generous enough
to satisfy the Affordable Care
Act's standards isn't a permanent one.
You may simply decide to meet the
standards in 2014, and see how things
play out with health exchanges and
the actions of other employers who
you compete with for employees.
»
»
www.hrp.net

9. 14550 Torrey Chase, Suite 100 Houston, TX 77014 USA
www.hrp.net
E-mail : info@hrp.net
Toll Free
Phone
Fax
:
:
:
877.880.4477
281.880.6525
281.866.9426

10. 14550 Torrey Chase, Suite 100 Houston, TX 77014 USA
www.hrp.net
E-mail : info@hrp.net
Toll Free
Phone
Fax
:
:
:
877.880.4477
281.880.6525
281.866.9426