Counting Employees in conjunction with the Affordable Care Act

Transcription

1 Counting Employees in conjunction with the Affordable Care Act 2013 Zywave, Inc. All rights reserved. Presented by ECM Solutions

2 Disclaimer ECM is offering this session to assist employers with a broad overview of counting employees and tracking employees in light of the Affordable Care Act (ACA). This information was obtained through UBA Compliance Resources as well as resources available through strategic partners such as Zywave. If there are any questions, specific to your organization, as always we advise you to make sure to seek legal counsel in advance taking action within your employee benefits package. We reserve the right to modify, change, and adjust this presentation as additional guidance from the Department of Labor and the IRS becomes available. We advise employers to always check updates and make sure to adhere to changes within the legal requirements provided under the Affordable Health Care act, including but not limited to counting and tracking requirements detailed in this presentation.

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4 Overview and Value of ECM to Tracking/Counting FTEs Counting Employees will be a challenging endeavor for most employers with variable hour employees. First, to calculate if you are an Applicable Large Employer (ALE) for the purposes of Pay or Play which is 50 or more Full- Time Equivalent. Secondly, to calculate who is actually a full-time employee under the new definitions of ACA. Larger payroll vendors such as ADP and Paychex have developed tools to assist clients within payroll systems, but those sometimes are not optimal. ECM has preferred partner relationships with online benefit administrative vendors that offer payroll integration and HRIS functionality. These vendors have adapted much more quickly to this tracking as it is really a byproduct of this integration between payroll. There are also options available through ECM/UBA that do NOT require online benefit administration integration. ECM has also leveraged carriers both through its own carrier partnerships and UBA arrangements to provide these services at a heavily subsidized rate through something we refer to as BenefitSolutions.

5 Counting Definitions of FTE vs. Full- Time Full-Time employee works an average of at least 30 hours per week during the month, he/she is considered full time for that month. (EXCLUDES: Sole proprietors, partners and 2% S Corporation shareholders.) FTE (Full-Time Equivalent) to calculate the number per month, divide total hours of service of all part-time employees by 130. This number (rounded down if a fraction) is added to the Full Time number to determine total number of Full-Time employees.

6 Counting Definitions Continued Part-Time works less than 30 hours per week or 130 hours monthly Seasonal Employees work either part time or full time hours during a busy season; not specifically defined in the new notice so will be employers good faith determination at least for Variable Hours Employees hours are uncertain and not reasonably expected to average 30 hours or more (includes those working full time at first but knowing hours will be reduced later and those on-call employees).

7 Who Is Considered An Employee? Common Law Employee Common-Law Employee no set definition but the parameters are: Hirer has control over how an individual performs a task and where the tasks are performed Length of relationship is indefinite Hirer provides material needed to complete the task Ability to assign additional tasks Sets work hours Payment is made on set schedule of time Work is part of regular business Benefits and perks are provided and person is invited to company events Training is provided Expenses are reimbursed

8 Controlled Groups and Affiliated Service Groups When one business owns a significant part of another business, there may be a controlled group. There are 3 types of Controlled Groups*: Parent-Subsidiary Brother-Sister Combined Group A group of businesses working together to provide services to each other or jointly to customers is called an Affiliated Service Group. Each business is a shareholder in the first service organization *. There are 3 types of Affiliated Service Groups: A-Organization (A-Org) B-Organization (B-Org) Management groups *All members of a controlled group and affiliated group will be used in combination to determine if an employer is large.

9 New Employees / Waiting Periods Handling Employees Expected to Work Full- Time To avoid penalties, a new employee who is reasonably expected to work 30 or more hours per week must be offered coverage following satisfaction of the eligibility waiting period. Under PPACA, the waiting period generally cannot be more than 90 days. No Play or Pay penalty will be owed during the waiting period if the employee is offered coverage that would be effective on or before the end of the permissible waiting period.

10 Counting Definitions of Seasonal vs. Variable Hour Employee Seasonal employee is not defined in the new notice and at least for 2014, an employer s good faith determination that an employee is seasonal will be honored. Also for 2014 only, employers can take into consideration the anticipated termination date. Usually, seasonal employment means employment for a limited period to perform a specific function, such as retail during holiday seasons. Variable hours employees are those whose hours are variable or are otherwise uncertain and who are not reasonably expected to average 30 or more hours per week over the measurement period. This would include both those expected to work full-time when initially hired but who are expected to have their hours reduced at some point.

11 Counting Hour of Service It is expected that current DOL rules for counting hours for pension plan purposes will be used to count an employee s hours of service as a full-time employee or full-time employee equivalent. Under these rules, a person is considered to have completed an hour of service with each hour for which he is paid for work, vacation, holiday, sick time, layoff, jury duty, military duty, etc. When converting time to a monthly basis, 30 hours per week would mean 130 hours per calendar month.

12 Counting Flexibility of Calculation An employer may simply look at its population on a current, month by month basis if it wishes to. However, to avoid the complications that may arise if an employee alternates between working more and less than 30 hours, or to simply reduce calculation frequency, IRS Notice gives an employer the option of using longer calculation periods to get a smoother, more predictable result if it prefers to do that. If the employer wants to use a smoothing technique, different processes apply to existing and new employees.

13 Counting Periods of Tracking Instead of tracking time currently, an employer may look at how many hours the employee averaged during a look-back period called a Standard Measurement Period. Once the determination is made whether the employee worked full-time during the standard measurement period that determination will apply throughout the related Stability Period regardless how many hours the employee actually works.

14 Counting Periods of Tracking Continued Standard Measurement Period A lookback period of 3-12 months used to track and determine how many hours he worked on average during this time period. The employer must choose a start date for the Standard Measurement Period. It can be any date the employer chooses. Maximum including administrative period cannot exceed 13 months in total from the Date of Hire

15 Counting Periods of Tracking Continued Stability Period Period for which the employee is considered Full-Time or not Full-Time and must be: At least as long as the Standard Measurement Period. At least 6 months if the employee is Full-Time but not more than 12 months. Must immediately follow Standard Measurement Period and any applicable Administrative Period. A period of up to 90 days given to employers to determine whether an employee is full-time during a Standard Measurement Period, and to enroll the employee if he is eligible. Can include time at both the beginning and the end of the Measurement Period. Cannot reduce or lengthen the Standard Measurement Period or Stability Period. Must overlap the prior Stability Period.

16 Example of Ongoing Seasonal or Variable Hours Employee If seasonal or variable hourly employee works an average of 30 hours in the Standard Measurement Period, they must be offered coverage through the next Stability Period. Employer A. has chosen to use a 12-month standard measurement period for on-going employees running from November 1st to October 31st. Administrative period of 61 days will be from November 1st to December 31st. Stability period of 12 months from January 1st to December 31st.

17 ABC Company Transitioning New Hires Into Standard Measurement Period 12 Month Standard 11 Month Initial Tim was hired on November 10, His Initial Measurement Period goes from November 10, 2014 to October 9, 2015 and the Administrative Period is October 10, 2015 to December 31,2015. He works an average of 32 hours. He must be offered coverage for a Stability Period that runs January 1, 2016 through December 31, ABC Company must also test Tim s hours during the Standard Measurement Period of September 1, 2015 through August 31, 2016 and if he works under an average of 30 hours/week, his Initial Stability Period still continues until December 31, 2016

18 Counting Example Follow-up Initial Measurement Period of 3-12 months Combined Initial Measurement Period and Administrative Period cannot exceed 13 months plus a fraction of a month (dependent on the hire date). Initial Stability Period: Must be the same length as the Stability Period for ongoing employees For new employees deemed to be full-time: must be at least as long as Initial Measurement Period and at least 6 months For new employees that are deemed not to be full-time: may not be more than one month longer than the Initial Measurement Period

19 Counting Rule of Parity Re-hired Employees: Review Employment Gap to Determine the Following: Less than 4 Weeks = Automatically continue as FT EE Less than 13 Weeks (26 Weeks for Educational EEs) = Compare gaps to prior employment gap. If greater than prior employment period, then treat as New Hire. If not, then continue as FTE. Greater than 13 Weeks (26 Weeks for Educational Ees) = Treat as a New Hire.

20 Counting Wrap Up Employers may use different standard measurement and stability periods start dates for these classes of employees: Collectively bargained and non-collectively bargained Hourly and salaried Employees of different entities Employees located in different states

21 Next Steps as an Employer Confirm process for counting employees and status of ALE. Make sure plan documents (SPDs) are updated appropriately to comply with you process. Make sure that you have a vendor that can track full-time employee status and measurement periods (payroll vendors, reporting vendors, and benefit administration). Determine process for necessary reporting.

22 BenefitSolutions ACA Tracking Vendors ECM partners with various online administrative vendors as well as strategic partnerships through UBA to provide employers with resources for tracking and monitoring employees.

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