Even with the postponement of its implementation to 2015, the Affordable Care Act needs everyone associated with the contingent workforce industry to waste no time in trying to understand what it requires of them. Deciding who qualifies for coverage and who does not requires a clear understanding of how long the contingent worker would be associated with the staffing firm, exceeding the normal capabilities of forecasting of any staffing agency.
At this point in time, deciding the eligibility of contingent workers, in conformity with the Act, is fraught with a great number of uncertainties and consequences which has left many industry players utterly confused about whether they should play or pay. The ACA differentiates between regular full-time employees and “variable hour” employees. If a worker is deemed a full-time employee, healthcare benefits must be available within 90 days of employment. For “variable hour” employees, a look-back period of up to 12 consecutive months is used to determine an employee’s full-time status, subjecting the worker to an initial, employee-specific waiting period prior to subscribing to the benefits program.
Here’s the rub: staffing agencies cannot automatically apply a look-back period to all contingent workers. Proper classification of variable hour employees is tied to the length of engagement, but the ACA does not specify what that length of engagement is!
The following IRS guidelines could be of some help in resolving the confusion:
A mistake in determining the above categorization, and waiting 13 months instead of providing coverage within 90 days, could result in a $2,000 penalty per employee, which could prove debilitating to any staffing firm. On the other hand, if the staffing firm decides to extend the coverage to more new hires to avoid being penalized later, the overall costs of the firm could increase, squeezing its already narrow margins further or taking away the cost effectiveness of contingent workers if the staffing company tries to recover the additional expense from buyers.
How could this reshape the staffing industry? Many different scenarios may play out:
The effective date for implementing the act was pushed to Jan 1, 2015. However, the 12 month look-back period requires staffing firms to get their act together. They must begin to evaluate historical workforce assignments in 2014 to understand the potential impact on their firms. And, they must prepare to meet the ACA statutes in a way that enables them to continue to provide great service to their clients while maintaining necessary profit levels. The implementation of the Act has a staggered schedule and it is important for employers to be agile in using the window of time available to set the strategic direction and processes right, without any loss of time.
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