Affordable Health Care Best Practices

The IRS has recently released the final regulations governing the employer shared responsibility provisions of the Affordable Care Act (ACA). These regulations address actions required by employers from 2014 into and through 2016. RSI is dedicated to providing clients with appropriate and accurate information to ease the transition into this new and complex law. The question remains, what are the requirements by employers under these new regulations?

First and foremost, it is important to understand the basics of the ACA and how it will affect both small and large businesses. Oversimplified, the ACA requires that applicable large employers provide affordable health care to full time employees beginning in 2015. Generally, applicable large employers are employers with 50 or more full time employees and affordable means the coverage will cost less than 9.5% of the full time employees’ income. If you are an employer with less than 50 full time employees, many of the provisions of the ACA will not apply to your business and operations can continue as usual;however, if you believe youmayfall into the category of large employer, there are several new requirements of you and your business to ensure proper compliance. Below is a list of services provided by RSI to help with this transition, as well as a list of actions that must be taken by you,as a responsible employer, to avoid any unnecessary fees and penalties:

Step 1 – Determining the Number of your Full Time Employees:

The first, and perhaps most important, major question to determine your employer status – How many full time employees does your business have? This number will indicate the actions necessary for your business to comply, with any necessary changes going into effect on January 1st, 2015. Unfortunately, this answer is not as simple as counting up employees clocking 40 hours per week. It is a combination of employees that work more than 30 hours per week, and an average that is computed by using the hours of employees that work less than 30 hours per week. The stages below outline how to use our reporting to determine your full time employee number.

  1. Selecting a Lookback Period–The IRS final regulations require a look back period of 12 months with an administrative period of no more than 90 days. This means that for 2015 compliance, the look back period should be from October 1, 2013, to October 1, 2014. This look back is to determine your full time employees on a basis of calendar month by calendar month and does not factor pay periods.
  • Transition relief– The IRS has passed transition relief for the calendar year 2014 to allow employers more time to comply with the ACA as well as allow the treasury department time to clarify many of the questions surrounding the act. The 2014 transition relief allows an employer to determine its status as an applicable large employer using a look back period of at least six months. This would indicate that a look back period could be between six and twelve months to determine employer status.

BEWARE - These look back rules ONLY apply in determining your status as an applicable large employer! These rules DO NOT apply for the determination of a full time employee for offering affordable health care. We will be releasing more reporting as necessary which will include the steps you will need to take in determining the full time status of employees for compliance in offering affordable health care.

BEST PRACTICE ALERT– RSI recommends using a 12 month look back period whenever possible for the following reasons:

Using a longer look back period insures the most accurate reporting of your full time employees. Data collected and reported over a longer period of time is generally more accurate and falls true when it comes to reporting the hours of your employees.

A longer look back period means you will be required to evaluate your status less often… this saves you both time and money!

It is unclear if the allowance for a look back period of less than six months will be permanent. Using a 12 month period will prevent complications in changing the method at a later date.

  1. Running the Report– You are almost ready to determine your status as an employer! You will now need to run the applicable large employee report provided in RSI Shifts Solutions, under the Reports tab.The following actions are required to ensure proper reporting:
  • Employer Action – Insure your payroll reporting is timely and accurate. All eligibility is based from the payroll reporting and NOT the POS source data. This means that the hours worked by your employees are accurate down to the day. The IRS requires the use of calendar months (not pay periods) when determining the number of employees, looking back over the last 6-12 months.Inputting time on days different than those actually worked could skew the report and in rare instances affect the large employer status.
  • RSI Action – RSI will provide the necessary reports indicating the number of full time employees and full time equivalents which will allow you to determine if your business is an applicable large employer. This report will give you all the data necessary to move on to step two and determine your status for the purposes of the ACA. See below:

REMINDER– Use the reports provided by RSI to determine if your business is an applicable large employer. Follow the appropriate action items based on the size of your business. Remember that RSI will provide you with the appropriate tools but ACA compliance is your responsibility.

BEST PRACTICE ALERT– This is an opportunity think about your hiring practices as well as how you schedule your employees. RSI understands that many things factor into payroll and reporting to the IRS is not generally on the list. Nonetheless, it will be beneficial to always keep the ACA in the back of your mind when making hiring and payroll policies. While the IRS has set rules that prevent employers from sidestepping the requirements of the ACA by cutting hours, there are still many steps that your business can take to help limit expense and possible liability. Some great tips are as follows:

Constantly evaluate your needs for full time employees vs. part time employees. One of the main requirements of the ACA is affordable health care be offered to full time employees. Create a plan to ensure that the employees you want working full time stay above 30 hours per week, and the employees you want working part time stay below that line.

Think about the classification of employees (Full Time vs. Part Time)at the time of hiring. This is also a good way to sell your business to prospect employees. Do not make offering health care a requirement of the government, but instead something you provide to full time employees as one of the many benefits of working for your business. Perhaps, this approach will help in limiting the costs of turnover that are prevalent in the restaurant industry.

Step 2 – Determining Your Employer Status:

Now you know how many full time employees you have, sowhat’s next? Classifying your business based on the number of full time employees is perhaps the most important action to ensure ACA compliance. The final regulations provide three levels of employer status with different action items depending on the size of your business. They are as follows:

  1. 1-49 Employees – No IRS reporting requirements. No requirement to provide affordable health care to full time employees (other than requirements active prior to the ACA). It is important to note that you must continue to track that your business does indeed remain under 50 employees and prepare/plan for a time where your business may exceed 50 employees.
  1. 50-99 Employees – You ARE an applicable large employer. You will be required to offer affordable health insurance to full time employees and report to the IRS the details of the insurance you provide to your employees. The IRS recently passed transition relief that extends the date of reporting and offering requirements until January 1, 2016. This means that even though the ACA rules go into effect on January 2015 and compliance is strongly recommended, there will be no penalties or fees assessed until 2016.
  1. 100+ Employees – You ARE an applicable large employer. You will be required to offer affordable health insurance to full time employees and report to the IRS the details of the insurance you provide to your employees starting on January 1, 2015. The IRS transition relief applies only to the number of Full Time of employees of which you are required to provide affordable coverage NOTE: A minimum of 70% of employees must be covered as opposed to 95%. (This is only for 2015).

BEST PRACTICE ALERT– Given that the application of section 4980H (requirement and penalties regarding affordable health care) is based almost exclusively on the number of full time employees, getting this correct is absolutely necessary! Please take the time now to ask yourself these questions and further examine your business:

Am I or the other owners also the owners of any other business? – For purposes of the Affordable Care Act, businesses with common ownership may be considered one employer. This would mean combining the number of full time employees among all the businesses and could result in applicable large employer status. Please contact your attorney and have them review your corporate structure and the possible implications.

Do I have employees that work at multiple units? –These employees hours may need to be separated or combined based on organization of your business(es). Similar to above, you will need to determine whether the businesses affected are considered commonly controlled under the Internal Revenue Code and then begin to analyze employees across different businesses.

Was my business organized in 2014?–In the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is an applicable large employer shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.

*Note: Please Read all best practices and timelines regarding your business’s classification as an applicable large employer. RSI is not responsible for IRS reporting or compliance with the ACA regarding health coverage provided to employees.

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