The Treasury Department made it a little easier for companies to comply with the Affordable Care Act (ACA) by delaying the employer mandate to provide health insurance for companies with 50 to 99 employees.
Those businesses will have until January 2016 before facing potential penalties, while companies with 100 or more full-time equivalent (FTE) employees still face a Jan. 1, 2015, compliance deadline.
“Some of it was about giving companies time to come into compliance, but they also don’t know yet how penalties will be enforced or collected. The law doesn’t allow the IRS to collect any penalties, so they have a real challenge trying to figure out how to collect the money,” says William F. Hutter, CEO of Sequent.
Smart Business spoke with Hutter about changes in the ACA and what they mean for employers.
What break have companies with 100 or more employees been given regarding the first year of the employer mandate?
For 2015 only, instead of being required to extend coverage to 95 percent of employees they have been granted a grace period and only need to offer coverage to 70 percent of employees.
But plans still have to meet minimum essential coverage standards and have to be affordable.
While companies are getting that break, one of the most difficult aspects of the ACA is the complexity of the reporting and tracking requirements for companies. Most companies with 100 or more employees are already meeting these criteria, but it’s really a challenge for companies with variable-hour workforces.
It can be pretty challenging for retail and hospitality businesses. When you have 70 full-time employees and 50 part-time employees, tracking those variable-hour employees to get your FTE count can be pretty challenging.
What do businesses need to be doing now?
A lot of the administrative details — creating your policy, and your measurement, administrative and stability periods — need to be done now. Make sure your HR and payroll systems can handle the necessary reporting because it’s going to be virtually impossible to track it with a pencil. You need a way to extract that data from your system in a way that matches the reporting criteria.
For larger companies — 100 employees or more — their look-back period to determine employee eligibility for coverage starts this year, correct?
Yes. A large retailer based in Columbus, Ohio, decided a few months ago that employees would either be full time and eligible or part time, never working more than 27 hours a week. More companies will adopt that tactic because it’s easier. They don’t want to worry about who might become eligible in such a volatile environment as retail.
Almost every company has part-time employees who could become eligible based on the measurement period. Let’s say they work 40 hours a week during peak season, are offered and take benefits, then drop back to 20 hours a week. Normally under IRS code, going from full-time to part-time status would create an open enrollment period. But the ACA says they’re still an eligible employee because they met the criteria during the measurement period, and the change to part-time status no longer produces an open enrollment opportunity because of the stability period.
We’re trying to figure out if there’s a nuance in the ACA that address this issue, but haven’t found it. The IRS says you entered into a contract for benefits until the next open enrollment period or change in family status. So the employer would still have to provide coverage and the employee would have to pay his or her share, even if it’s too expensive on a part-time salary.
That’s one of the challenges with the ACA — it’s constantly changing and evolving. Once you digest and understand the implications of it from a business operational standpoint, it changes again. Because of the latest delay, businesses with 50 to 99 FTE employees don’t need to worry about it for a while and can probably wait until things calm down. ●
William F. Hutter is the CEO of Sequent. Reach him at (888) 456-3627 or [email protected].
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