ACA Requirements….It’s Not Just About the Reporting!
We get it. We feel your pain. But at Stambaugh Ness our commitment to providing you with the critical information you need is paramount. So let’s dive into the ACA requirements that you are tired of hearing about, but need to know.
Everyone was able to breathe a sigh of relief when the IRS announced that the deadline for filing Forms 1094 and 1095 was extended. The extension allows employers and insurance carriers more time to analyze the data collected and prepare all necessary forms needed to meet the reporting requirements. Discussions surrounding the reporting requirements of the Patient Protection and Affordable Care Act (PPACA) seem to have overshadowed the compliance portion of the legislation. Applicable Large Employers (ALE), (companies with 50 or more full-time equivalent employees), need to be monitoring their compliance on a monthly basis.
As part of the employer shared responsibility provisions of the PPACA, ALE’s must offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents) or the employer could face significant penalties. There are three critical action items that ALE’s should take in their effort to ensure compliance: establish measurement periods, identify and monitor variable employee hours, offer coverage to all eligible employees.
The first critical action is for an ALE to define their measurement periods. The IRS has established four types of measurement periods, which are defined below.
- Standard Measurement Period or Look-back period – the purpose of this measurement period is to determine the ongoing employees who worked at least an average of 30 hours or more. ALE’s can use anywhere between a six to twelve month period of time.
- Administrative Period – the purpose of this measurement period is to allow ALE’s up to 90 days to analyze the information collected during the standard or look-back measurement period.
- Stability Period – this measurement period can be anywhere between six to twelve months in length. This is the period of time that those who were eligible, and elected to participate in the health plan, are allowed to remain enrolled in the plan even if they drop below the 30 or more average hours qualification.
- Initial Measurement Period – the purpose of this measurement period is to determine if a newly hired variable employee worked at least an average of 30 hours or more and should be offered coverage.
Monitoring variable employee hours is another critical action item ALEs should take. This will allow employers to identify who will need to be offered coverage at the end of the next standard measurement period or who may need to have their work schedules modified. The IRS defined a variable employees as any individual who is not “reasonably expected” to work more than 30 hours per week for long durations, so that his/her average hours worked do not exceed 30 hours per week during the initial or standard measurement periods. Any variable employee who works an average of 30 hours or more in their initial or standard measurement periods must be offered coverage.
The last critical action item ALEs should take when monitoring compliance is to ensure coverage is offered to all full-time employees on a timely basis. This applies at the end of the initial measurement period for newly hired employees and at the end of the standard measurement period for ongoing, variable and seasonal employees. While the standard measurement period is consistent for all ongoing employees, ALEs are challenged with monitoring the initial measurement periods for employees hired at different points in time throughout the year.
In 2016 it is critical that employers place as much focus on ACA compliance as has been placed on the reporting requirements. Functionality has been added to many of the HRIS or Payroll systems to assist ALEs with monitoring compliance with PPACA. View our on-demand webinar “Getting the Most Out of Your Payroll System” to find out more ways to leverage your HRIS and/or Payroll system to track and report information necessary for everyday business decisions.