Are You Ready for the Affordable Care Act? | DCR Workforce Blog

Are You Ready for the Affordable Care Act?

affordable healthcare actWith the numerous delays that have been recently applied to the Affordable Care Act (ACA), many companies are adopting a “we’ll cross that bridge when we come to it” attitude.  These employers seem to think there is no need to hurry as an employer’s mandate of ‘shared responsibility’ under the Act will not come into play until January 1, 2015. But, if they think that it means they have nothing to do until then, they better think again. Let us look at what they will need to do to stay on track.

Employers need to start tracking and recording employees’ work hours. Here are some reasons why this is an important requirement:

  • This payroll data is necessary and useful because the Affordable Care Act is applicable only to large employers with an average of at least 50 full time and full time equivalent employees over the previous calendar year. This makes it necessary for employers to track the number of employees they had on the pay roll, and the hours each employee worked over the year in order to decide how many of them worked for 30 hours or more in a given week (the ACA’s criteria for “full time”).
  • Without maintaining such a record, employers will not be able to know whether the mandates of the ACA apply to them or not. They cannot also prove to the IRS that they are not large employers as defined by the ACA and hence need not ‘play or pay’ in accordance with the ACA.
  • To determine the number of full time equivalent employees, companies must add up all the hours worked by their employees in a month and divide the total by 120.  This helps to avoid situations in which employers each worker’s hours below the 30-hour threshold and then fill in the gaps by increasing the number of part-time workers.
  • The ACA requires an employer to provide health care coverage as per the ACA to at least 95% of its full time employees and their dependents.  Historical records are needed to identify qualifying employees.
  • Eligibility under the ACA will depend on hours worked.  Employers cannot exclude temporary workers based on their employment category anymore. Under the ACA, hours of service can be the hours during which a worker performed duties for an employer as well as the hours for which the employee is entitled to payment, even if no duties were performed during a leave of absence.
  • If employers find that they had engaged the equivalent of 50 full time workers for 120 days or less in a whole year the employer may not be considered as a large employer under the ACA.  This is an important factor for companies that experience short-term surges in hiring for seasonal workers.

It is the employer’s responsibility to offer health coverage to full-time workers or to pay the penalty for failing to provide adequate coverage. Based on the payroll records, if employers find that they are classified as large employers under the ACA; they must ensure that none of their full time employees seeks a premium tax credit or purchase subsidized health coverage through a Health Insurance Exchange. Data gathered prior to January 1, 2015 will provide the information needed by employers to assess the cost-benefits associated with deciding to “pay or play”.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.