After breathing a collective sigh of relief with Obamacare delayed, many employers are putting off the hard decisions. This is a costly mistake. President Obama’s recent announcement that the deadline for implementation of the Affordable Care Act for employers would be moved to January 1, 2015 did buy an extra year to dig through the can of worms but that doesn’t mean you should shove it aside to think about later. Within its jungle of regulations, the ACA does have a safe harbor for employers, but like any safe harbor, plans and positive action must be taken to sail into it. A safe harbor means nothing if procrastination keeps you from entering it.
Entry into the safe harbor requires some documentation that, with a little preparation, will be easy for most employers to supply. Let’s look at the key points of the safe harbor:
• Employers need to look at whether to modify their probationary periods for employee eligibility for health insurance coverage. The ACA requires that probationary periods not exceed 90 days. If a new employee works full time (30hrs per week or 130hrs + per month) in the initial 90 days or is expected to be working full-time. An employer that sponsors a group health plan and offers coverage to the employee on or before the employee’s initial three months of employment will not be subject to the employer responsibility payment under §4980H.
• Employers who have seasonal employees need to review the hours that those employees are expected or normally work. Generally these employees may be subject to the 90-day rule. However, to be a seasonal employee under the ACA and not be counted in the 50 FTE test these employees must not work more than 120 days in a calendar year. Christmas hires are a good example. If the employee is hired for the Christmas season starting November 1 and is terminated on February 1, they have worked 61 days in one calendar year period and 59 days in the following calendar year. Since he did not work more than 120 days in a calendar, they are not included in the FTE calculation. Service or packing industry employers who do not realize this distinction may mistakenly include them in the calculation, which could put the small employer into a large employer status.
• For ongoing employees with variable schedules, employers may need to consider the value of having a longer initial measurement. The longer initial measurement may more accurately reflect whether the employee is a full-time employee or a part-time employee who simply works some full-time shifts. By making a longer initial measurement, the employer may be able to reduce costs by accurately identifying who is truly a full-time employee versus a part-time employee who does not have to be offered health coverage.
• Employers need to review their schedules for all employees and construct their initial measurement, based on the hourly data. By looking at the data in constructing your initial look back /stability periods you give consistency to your employees, who can now count on their new benefits under the ACA and identify the specific cost savings.
• Employers will also need to review payroll data for each employee and determine if the coverage offered is affordable under the ACA. An employer will not be subject to a penalty under section §4980H(b) for an employee if the required contribution for that employee is no more than 9.5% of the employee’s W-2 wages . An employer who does not review the payroll data may find themselves with multiple fines based on affordability – fines that could have been avoided.
So if you’ve procrastinated and done nothing or thrown up your hands in confusion, hoping through some divine intervention that you will not be faced with a fine, assessment or premium increase, you have been given a short reprieve. Use this time wisely, and you’ll be comfortably berthed in the safe harbors that apply to you when the law does kick in 17 months from now.