With yet another delay in the Affordable Care Act’s employer mandate, this may seem like a good time to breathe a sigh of relief and focus on more pressing problems.
But don’t relax for too long – the mandate is coming. This year is a great time to start analyzing your current workforce, and to make sure you have the right data to make smart decisions next year.
When Is It Happening?
The U.S. Treasury Department in February 2014 released final rules governing the act’s employer mandate. While employers may not be exactly celebrating this release, it does add some certainty to an area that has seen numerous delays, extensions, and transition rules. Let’s call that a silver lining.
These rules give employers with between 51 and 100 employees another year to comply with the requirement to offer all full-time employees health care coverage. They also grant a little transition relief to larger employers, like school districts.
In 2015, if an employer with 101 or more employees offers affordable coverage with minimum value to at least 70 percent of its full-time employees, there will be no global penalty. The global penalty is the annual $2,000 per full-time employee penalty for not offering coverage.
If you do fall subject to this penalty, for 2015 only you will be allowed to disregard 80, rather than the normal 30, full-time employees.
Of course, any full-time employee who is not offered coverage and who receives a subsidy for coverage through the act’s Marketplace still will trigger the per-person annual penalty. Beginning in 2016, all large employers (50 or more employees) will be required to offer coverage to at least 95 percent of full-time employees in order to avoid the global penalty.
The other helpful piece of transition relief relates to employers who offer health care coverage on a fiscal-year plan year (e.g., coverage starts on July 1 or Oct. 1, rather than Jan. 1), as many school districts do. Employers who have been offering health insurance on a fiscal-year plan do not need to comply with the mandate until the first day of their 2015 plan year.
In other words, if you have always offered health insurance from July 1 to June 30, you now have until July 1, 2015, to offer affordable coverage to your fulltime employees. No employer penalties will apply for the months in 2015 before the first day of your plan year. However, if affordable coverage providing minimum value is not offered by the first day of your 2015 plan year, you will be penalized for each month in 2015 during which no suitable coverage was offered.
Beginning in 2015, every large employer will be required to report certain information about its full-time workforce to the IRS, along with W-2 information. The IRS is asking employers to voluntarily comply with this reporting in 2014. Whether or not you decide to do so, it’s probably a good idea to see what will be required.
The following information must be reported annually:
- The employer’s name, address, and employer identification number;
- A contact person and phone number;
- Certification that full-time employees were offered minimum essential coverage, for each month of the year;
- The number of full-time employees each month;
- For each full-time employee, the months during which he or she was offered health care coverage.
One of the biggest issues facing many districts is how to treat substitute teachers.
Unfortunately, the final rules don’t offer much guidance. However, since we now have an additional year to comply, it makes sense to gather data on exactly how many hours substitutes are working.
In my experience, it seems that most school districts don’t have a clear idea of how many of their substitutes would meet the act’s definition of “full-time.” Now is a great time to figure that out.
By now, every employer should be measuring all hours worked by all part-time employees on a monthly basis. With the Affordable Care Act, this is just information you need to have. Most employees can be classified easily as full-time or part-time, using the new 30-hour week definition. However, for substitute teachers, it’s not always so clear.
School districts have three options when it comes to substitutes:
- Simply offer them coverage and save yourself some hassle (but not money);
- Call them “variable hour employees,” and set up the standard measurement period/administrative period/stability period system; or
- Decide that they will not be offered health care coverage, and resign yourselves to paying the penalty for any month in which they actually work 30 or more hours a week.
What Do These Choices Mean?
For most districts, the choice is realistically limited to the latter two options.
If you choose to measure substitutes’ hours during a standard measurement period, and then offer coverage to those who have earned it during a subsequent stability period, the time for measuring those hours is now.
If, for example, you operate on a July 1 to June 30 plan year, the first measurement period should begin in mid-May. This will leave an ample administrative period to tally the results and make the offers of coverage. Your stability period will then match your plan year.
Schools are under special rules that don’t allow you to include summer breaks in this analysis. However, if a substitute also teaches summer school, these rules may not apply.
The benefit of this approach is that it seems fair to employees, and it rewards employees who choose to work as often as possible. From a budgeting perspective, an ongoing analysis of this year’s hours worked may provide an idea of how many substitutes will likely be full-time in a given year.
The third option has the advantage of having a lot less administrative hassle. In this scenario, you simply would notify substitute teachers that they will not be eligible for your health care policy, regardless of how many hours they work.
Then, beginning in 2015, you would face a penalty of $250 ($3,000÷12) for every substitute teacher who worked full-time in any given month.
There are a couple of things to keep in mind with this approach. First, you only will be penalized if a substitute actually works full-time in a given calendar month AND receives subsidies for health care coverage through the Marketplace in your state. So, you cannot be penalized for anyone who might have coverage through a spouse, or Medicare or Medicaid (because they will not be eligible for subsidies).
Second, this only works if you offer coverage to at least 95 percent of your full-time workforce, including any substitutes who are full time. Otherwise, you risk subjecting yourself to the global penalty. This probably will not be an issue, as long as you offer coverage to 100 percent of your non-substitute full-time workforce.
This latest delay is a gift: the gift of time, to gather more information and to make informed decisions. Use this year wisely.