Profiles in ACA Compliance

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As the Employer Shared Responsibility provisions of the Affordable Care Act take full effect, many businesses are facing similar questions: Do the Employer Shared Responsibility provisions apply to me? Which employees must I offer health care coverage to? When must I offer them coverage? A typical business facing these questions is profiled in this paper, as are the automated workforce management solutions that can help organizations comply with the Affordable Care Act.

Owner Profile: Sean

Sean owns a small chain of specialty tea stores. In 2015, he employed 20 full-time employees, each of whom worked on average 35 hours per week, and 40 part-time employees who each averaged 90 hours of service per month. His employees all work year around. Sean does not currently offer his employees health care coverage, but he wants to comply with the Affordable Care Act.

Do the Employer Shared Responsibility provisions apply to Sean?

In order to answer this question, Sean must first ask himself another question: Is he an Applicable Large Employer? Under the Affordable Care Act, only Applicable Large Employers (ALEs), defined as those employing 50 or more full-time equivalent employees, are subject to the Employer Shared Responsibility requirement to offer minimum essential coverage to their full-time employees or face penalties. At first glance, Sean does not appear to be an ALE, as he only counts 20 full-time employees. In order to determine his ALE status, however, Sean must also include full-time equivalent employees in his total “full-time employee” count.

Profiles in ACA Compliance

Sean first determines that his 20 “full-time employees” are in fact full-time according to the ACA’s definition, as they all work 35 hours per week.

Number of full-time employees for each month: 20

Next, Sean must calculate his number of full-time equivalent employees. To calculate this number, he first calculates the total number of service hours of his 40 part-time employees for each month in 2015.

40 part-time employees x 90 hours of service per month = 3,600 total service hours per month

3,600 total service hours per month ÷ 120 = 30

Number of full-time equivalent employees for each month: 30

Adding together his full-time employees (20) and full-time equivalent employees (30) for each month, Sean finds that he has 50 full-time employees for each month in 2015 and is in fact an ALE subject to the Employer Shared Responsibility provisions of the ACA.

Which employees must Sean offer health care coverage to and when?

Now that Sean has determined that the Employer Shared Responsibility provisions do apply to his company, he must decide which employees to offer health care coverage to. To avoid penalties, ALEs must offer minimum essential coverage that is affordable and provides minimum value to their full-time employees and dependents. While full-time equivalent employees are counted as full-time employees for purposes of determining ALE status, they are not counted as full-time employees for purposes of offering coverage. Only those employees who work, on average, at least 30 hours of service per week are considered full-time employees to whom coverage must be offered.

Sean has two methods for determining the full-time status of his employees:

  • Monthly measurement
  • Safe Harbor measurement

The monthly measurement method involves a month-to-month analysis of employee statuses, while the Safe Harbor method allows an employer to average an employee’s hours during a measurement period in order to determine his or her status for a future period. Because the second method provides predictability and flexibility, Sean decides to use the Safe Harbor measurement method to determine his employees’ statuses. This method allows an employer to define three periods of time for the measurement, administration, and ongoing stabilization of an ongoing employee’s status. For new employees, the Safe Harbor Method includes an additional Startup Period.

Safe Harbor Method: Ongoing Employees

Profiles in ACA Compliance

Safe Harbor Method: New Employees

Profiles in ACA Compliance

With these guidelines in mind and taking into consideration that his insurance plan cycle begins in November, Sean establishes the following determination process for his ongoing employees.

Determination Process for Ongoing Employees

Determination Process for Ongoing Employees

For new employees whose full-time status is not known at the date of hire, Sean also decides to use 12-month Measurement and Stability periods, and a 1-month Administrative period; however, he also establishes a Startup Period of 3 months. Sean hired several new employees in 2015, including one in May of that year. For that employee, Sean used the following determination process.

Determination Process for New Employees

Determination Process for New Employees

Workforce Management Solutions for Automating ACA Compliance

As a busy owner of a thriving business, Sean is concerned about how he will manage his business’s compliance with the Employer Shared Responsibility provisions of the Affordable Care Act. Fortunately, Sean learns that the same system that he uses to track his employees’ in and out times can help him automate many of the tasks necessary for staying in compliance with the ACA. It can help him determine

  • Whether or not he employs 50 or more full-time or full-time equivalent employees
  • Which employees have full-time status
  • When the full-time employees are entitled to healthcare coverage.

His workforce management system is flexible enough to allow him to set his own Measurement, Administration, and Stability periods for both ongoing and new employees, and it also provides detailed and summary reports designed especially to aid in managing ACA compliance. These reports provide a breakdown of ACA data collections and store monthly full-time equivalent values and hours for all employees who are not configured in the system as full-time employees.

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Affordable Care Act – Employer Compliance through Automated Solutions