The first lesson in carpentry is to measure twice and cut once. The same can be true for large employers.
Large Employer Reporting –
Measure Twice, Report Once
The first lesson in carpentry is to measure twice and cut once. In a fashion, the same can be true for large employers (100+ full-time employees in 2015 and 50+ in 2016) under the Affordable Care Act (ACA). Large employers must report to the IRS employee status during measurement periods to establish who must be offered coverage, who is not eligible and when they may become eligible. Because there are multiple methods of measuring the eligible population, we recommend monitoring a couple of ways:
- Establish a 12 month Look-Back Period for determining who is full-time eligible (average 30 hours of service a week for 90 days) and who is part-time, and not eligible for benefits.
- Monitor by month or pay period the ongoing status of all employees. This is especially important for variable hour or seasonal employees, which we see in many service industries.
Of course, like many aspects of the ACA, there are numerous confusing rules and exceptions, especially as it relates to variable hour employees. For example in The Employers Guide to Obamacare, by Kaya Bromley, JD, MSW, notes:
Currently the regulations state that if an employee was part-time during the look-back period, the employer “can” treat that employee as part-time during the stability period. This is pretty wishy-washy language. The safe bet is to assume if someone is part-time during the look-back period, but is consistently employed full-time during the stability period, that person should be offered coverage within 90 days of becoming full-time.
Likewise, she notes, under additional Look-Back period rules there are Reasonable Expectation guidelines that we examine to determine eligibility. Specifically:
- An employee status as full-time or variable hour depends on whether or not you reasonably expect that employee to work an average of 30 service hours a week. Factors include:
- Is the employee replacing a full-time employee?
- Are other employees in the same comparable positions full-time?
- Was the job advertised as full time?
- Full-time employees hired in the middle of a measurement period must be offered coverage within 90 days (which means you could be onboarding new employees each month)
- The real big area to watch is a variable hour employee hired during your measurement or stability period that cannot be determined whether they will reasonably be expected to work an average of 30 hours a week. You may use an ‘initial measurement period’ of 3 to 12 months to determine that employee status. The stability period for that employee must match others in the same category. If the employee is deemed part-time during the initial measurement period, they may be considered part-time during the stability period unless you change their status to full-time.
Having a system to track all these moving parts is an essential protection against making errors and facing potential penalties, which can be excessive. This is why we recommend the ADP integrated payroll and ACA reporting program and the Cube4 stand-alone ACA compliance software to help keep you compliant with the law.
For more information and a Free Analysis of your program, contact Doug Helser, CBC of Simplifi Benefit Solutions at 614-635-8678 today.