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Affordable Care Act Employee Mandate: How’s It Shaping Up?

The Affordable Care Act (ACA) employer mandate is in effect for 2015, at least for companies with more than 100 full-time equivalent (FTE) employees. And although the compliance deadline has been pushed back to 2016 for companies with 50 to 99 FTE employees, those who haven’t started planning will have a hard time catching up.

Here are a few things employers should know:

  • Although companies with 100 or more FTE employees must begin complying with the ACA coverage requirements in 2015, they will have two years to phase up to covering the required 95 percent of FTE employees as well as their dependents up to the age of 26.
  • Hiring through temp agencies may help, but it isn’t a silver bullet. Respected firms like The HT Group treat many temp workers as FTE employees and are therefore required to count them as such. Companies utilizing temp agencies in this way should understand this added cost may be reflected in increased rates.
  • Pay attention to the Save American Workers Act, which would change the current ACA definition of full-time workers from those working 30 hours per week to those working 40 hours per work. If passed (and if the President does not veto, which he’s threatened to do), that definition may drastically change the amount of employees you’re required to cover.
  • The Hire More Heroes Act is also making the rounds in Congress. The Act incentivizes small businesses to hire veterans by exempting employees who hold health care coverage from Tricare, or from the U.S. Department of Veterans Affairs, toward the number of employees at small businesses.  For example, writes Connor A. Sabatino, associate and litigation attorney for Foley & Lardner LLP, “a small business hovering around 50 FTE employees would be able to avoid the employer mandate by hiring more veterans, thereby bringing its effective count of employees below the 50-FTE threshold.”
  • On August 28, 2014, the IRS re-released the draft forms employers should use to report compliance with the ACA beginning in 2015. Companies will need to provide this information by March 2016. Companies smaller than 50 FTE employees are exempt, but can receive significant tax benefits if they do comply.

“I have been swamped with inquiries about how to prepare,” says Derek Flynn, shareholder and member of the Employment and Litigation Section at Munsch Hardt Kopf & Harr, P.C. “The best advice I can give right now is to consult with your insurance agent and tax advisors regarding your current plan to make sure it complies with the requirements.”

Flynn also recommends seeking legal counsel to do an employee classification audit.

“An employee classification audit will ensure you have properly classified your employees as exempt versus non-exempt versus independent contractors. The reporting requirements could trigger wage and hour audits if you haven’t properly classified your employees,” he adds.

And what about those choosing to pay instead of “play”? They can expect a flat $2,000 fine per FTE employee, excluding the first 30 employees. The U.S. Chamber of Commerce offers a penalty calculator for those wanting a rough idea if what they will owe.

“As far as choosing to pay the penalty or comply, that is clearly a business decision that requires a cost benefit analysis,” Flynn says. “My gut feeling is that compliance—for large companies with 50 or more employees—will likely cost significantly less than paying the penalty.  I would also add, given the political nature of this Act and the recent shift in power in both the Senate and House, I reasonably anticipate some political wrangling at both the state and federal level to change some, if not all, of this over the course of the year. The only thing I can say with certainty is that the ACA continues to be a political and economic firestorm that will likely stay at the forefront of the news as 2015 gets going. Companies need to stay on top of it.”

With or without the ACA, covering employees has gotten exponentially more expensive in the past 10 years. In Texas, since 2003, the average amount Texas employers pay to help cover health care premiums has doubled to more than $1,000 per employee.  At the same time, deductibles for those covered rose nearly 150 percent. These increases, however, slowed dramatically in the past three years (with the majority of growth happening before 2010), claims the research group the Commonwealth Fund.

For a refresher on planning for the ACA employer mandate, revisit our 2014 article “Affordable Care Act for Employers: 5 Actions to Take Right Now,” featuring advice from both Flynn and Barrows Group, LLC Benefits Coordinator Trish Gates.

Does the ACA employee mandate affect your own workforce? If so, how are you dealing with the changes? We’d love your input.


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