The Affordable Care Act and Payroll

According to the Affordable Care Act, all American citizens must be enrolled in a health insurance plan in some form that provides Minimum Essential Coverage or pay penalties. That is how broad and wide ranging the ACA is. There is no doubt that the ACA has significantly increased employers’ administrative duties in order to meet compliance requirements. Significant data input, maintenance and reporting are required. A broad range of organizational assets consisting of Payroll, HR, ATA, Benefits, and Finance management, as well as additional outside resources, must be utilized in a coordinated effort to manage all aspects. Additionally, failure to comply can be very costly. Time & Pay is ready to help ensure compliance.

In 2016, the ACA requires employers with 50 or more full time and full time equivalent employees (FTE) to be subject to the Employer Mandate. That mandate, referred to as the Shared Responsibility requirement, specifies that all Applicable Large Employers (ALE’s) offer health insurance coverage that meets both Minimal Essential Coverage (MEC) and affordability standards as defined by the ACA. (Note that while the IRS did provide some transition relief in 2015 for those employers with less than 100 full-time and full time equivalents employees, employers with 50 or more FTE employees were still required to file 6055 defined reports with the IRS. For 2015, the IRS also allowed filing extensions.) For 2016, there is no indication of Transition Relief or filing extension.

Defining A Full Time Employee

The ACA defines a full time employee as one that “works” an average of 30 hours per week during a look-back period defined by the regulations. The ACA notes that those worked hours include all paid hours including vacation, sick, PTO, FMLA and jury. The FTE employee is designed by the plan is to take into account all full-time and part-time workers.

For example, an employer who has 3 employees that average 20 hours of work per week during the defined look-back period translates into having 2 FTE employees. (3 x 20 = 60 / 30hrs = 2 FTE’s). If you have 100 employees, each one working at least 15 hours a week, you have at least 50 FTE’s and are an ALE. (The easiest way to determine how many FTE’s you have is to take all the hours your employees work during the year, divide by 12 to get a monthly average, and then divide by 130.)

ALE Reporting Requirements

ALE reporting requirements to the IRS are substantial. Basically you report on each FTE’s, their status each month of the year and the offer of health Insurance to the employee and their dependents. ALE’s must have systems in place to track data required to complete Section 6055 reporting requirements that include forms 1095 and 1094 reconciliation. These systems need to track information that includes but is not limited to:

• HR – Hire dates, termination dates, re-hire dates, employment status, types of coverage offered, dependents, etc.
• Payroll – Personal income data, hourly rate of pay, hours paid-worked and not worked, affordability, Safe Harbor status.
• ATA – Accurately track hours worked for all employees by the month, absences and unpaid leave.
• Benefits – Health insurance plans and the offerings of coverage, minimum 60% actuarial value coverage

Employers will also have to work with their insurance providers to confirm their Health Plan’s specific coverage, affordability and MEC certification.

For more specific details on what information employers will need to focus on for compliance reporting, read this article.

Time & Pay offers a variety of systems and services that can help you determine if:

• You are required to comply with the ACA,
• Verify to the IRS why you are or are not required to comply with the ACA,
• Ensure that you do comply with all the filing requirements if you are an ALE.We provide integrated systems that ensure your business maintains the necessary data for compliance with ACA requirements and reporting to avoid costly penalties.

As you can see, there is little doubt that the ACA has changed the way you manage your employees, your payroll and your business. If you are not up to speed on your requirements, you need to be.