Human Resource & Payroll Services And Solutions - Houston, Dallas, Austin - Texas www.hrp.net. If you are scrambling to come to terms with the 2010 Patient Protection and Affordable Care Act (ACA), you are in good company. In this presentation, you will get information about the affordable care act and your responsibilities as an employer.
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The Affordable Care Act and Your Responsibilities as an Employer
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Phone: 281.880.6525
The Affordable Care Act and Your
Responsibilities as an Employer
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2. » If you are scrambling to come to terms with the 2010 Patient Protection
and Affordable Care Act (ACA), you are in good company. A poll of human
resource managers by the Corporate Synergies Group immediately
following the election found that around 20 percent reported they need
to "speed up implementation" of required compliance with the law, and
another 16 percent said they "don't know where to go from here."
» Under the ACA, employers with 50 or more employees will be subject to
an "assessable payment" (i.e. the "pay or play" tax) if they don't meet the
law's requirements beginning in 2014. Specifically, employers must
provide "minimum essential coverage" to full time employees (FTEs) and
their dependents. The coverage must be deemed affordable and provide
adequate "value."
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3. Defining "Affordable"
» What's "affordable?" The IRS has provided a "safe harbor" definition as
limiting employees' contributions towards the cost to 9.5 percent or less
of their W-2 wages. As for "value," the federal government is working on
various methods of defining it. But if the benefit employers pay provides
at least 60 percent of the value of total coverage, that might do the trick.
» Battles have been raging over the specific components of health benefits
meeting the "minimum required coverage" test. But for now, the law firm
Drinker Biddle is telling its clients in a recent report that "most employer-
sponsored group health major medical coverage will meet this broad
definition."
» In other words, employers can outsource that concern to the health plans
that will be competing for their business, including those offering basic
plans through health care exchanges.
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4. » The IRS' latest detailed ACA guidance on the meaning of "full-time
equivalent" requires a bit of explanation. It was offered, IRS states, "to
encourage employers to continue providing and potentially to expand
coverage by permitting employers to adopt reasonable procedures to
determine which employees are full-time."
» The simple answer to who is a full-time is this: an employee who works on
average at least 30 hours a week or 130 hours a month. But, the devil
may be in the details.
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5. 90-Day Exclusion Limit
» One safe harbor says that employers can hold off on offering health
benefits to newly hired FTEs for up to 90 days. But what if it is unclear
during those 90 days whether a new hire ultimately will work full-time? In
that scenario, the plan "may take a reasonable period of time to
determine whether the employee meets the plan's eligibility condition,"
according to Drinker Biddle.
» Safe harbors for the definition of FTE status for ongoing employees are
more intricate. But in general, according to Drinker Biddle, you need to
review the number of hours an employee worked during a "standard
measurement period" to determine whether that employee will be
deemed full-time for a future "stability period."
» The "standard measurement period" has to be "a period of time of 3-12
consecutive calendar months, as chosen by the employer," the firm
states.
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6. » And the "stability period" (during which the employee deemed to be a
FTE under the "stability period test") must be at least as long as the
greater of these two options: six months, or the standard measurement
period.
» Thus even if you test an employee's FTE status using only a three-month
"look back" period, and that employee did work full time during that
period, the employee must be assumed to be full-time for purposes of
health benefit eligibility for the next six months.
» The safe harbor plot thickens for new seasonal employees and variable
hour workers. While the rules are similar to those for ongoing employees,
they take into account "that there is no historical point of reference for a
particular employee."
» In some cases, and until the government provides further guidance,
"employers are permitted to use a reasonable, good faith interpretation
of 'seasonal employee,'" according to Drinker Biddle.
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7. The Cost of Non-Compliance
» And the consequences of a failure to cover FTEs in 2014? That varies
according to whether no coverage is provided at all, or whether the coverage
is deemed "unaffordable."
» The "no coverage" penalty -- levied even if only one FTE doesn't receive
coverage, generally equals $2,000 multiplied by the number of your total
FTEs, minus 30.
» That means, for example, that if you have 55 FTEs and at least one of them
doesn't receive coverage, your penalty would be 55 minus 30 equals 25 times
$2,000 equals $50,000.
» The penalty for providing "unaffordable" coverage or coverage that flunks
the value test is levied if at least one employee opts to receive premium
assistance (via tax subsidies provided by the ACA) to buy health coverage
through a health exchange.
» Eligibility definitions are still being worked out; most employers will have
employees who meet that test. The penalty: $3,000 for every employee
receiving premium assistance. (However, the total penalty cannot exceed the
amount used to set the "no coverage" fine). www.hrp.net
8. The bottom line for employers now, Drinker Biddle is advising its clients,
is that you need to:
• Eliminate any waiting periods for health benefit eligibility that exceed 90
days,
• Determine which employees meet the FTE definitions,
• Analyze all the costs, both in dollars and employee relations terms, of
continuing to cover them (or beginning to), and
• Evaluate current employment classifications to figure out "whether business
needs can be met by reclassifying some employees," and the business
impacts of not providing health coverage to those employees.
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9. » The information above should help clear up the mystery of the road
ahead somewhat. But again, rest assured you are not alone in wondering
what the future holds.
» As deadlines draw closer, the government will issue more and more
guidance to help ensure you understand your obligations under
the Patient Protection and Affordable Care Act.
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