The Affordable Care Act (ACA) is the most impactful federal legislation to affect healthcare insurance in many years, challenging large companies with new reporting requirements focusing on employee time and attendance. As a business owner or HR manager, it’s essential to understand the effects of the law and get staff up to speed on the new compliance measures. HR departments must assess their processes and systems in order to embrace what’s known as “Pay or Play.”
Pay or Play 101
This ACA provision requires companies with at least 50 full-time employees to offer the opportunity to enroll in certain healthcare plans – or face penalties for failure to do so. The minimum coverage that’s acceptable under the ACA is defined in the statute but, as it relates to time and attendance systems, certain terminology is of particular interest.
- Full Time Employee: A person is considered full time if they averaged at least 30 hours of service per week, measured on a month-long period, or 130 hours per month. The amount runs contrary to many organizations which count 40 hours per week as being full time.
- Full Time Equivalent: The term refers to any combination of employees, each of whom work less than 30 hours per week with an employer – but who are counted together as the equivalent of a full-time worker. The FTE is measured for purposes of determining whether a company has 50 full-time employees.
How Pay or Play Impacts Large Employers
Companies must make a standard health benefits package available to employees who meet predetermined benefit levels, known as “minimum essential coverage”. Failing to do so subjects businesses to certain penalties, which are best described by:
- An employer refuses to offer at least 95% of its full-time employees the opportunity to enroll in an eligible plan with minimum essential coverage. The company pays a $2,000 annual excise tax per full-time employee, excluding the first 30 full-time employees.
- A company does offer at least 95% of its full-time workers the opportunity to enroll in an eligible plan, but it’s either unaffordable for the employee or does not meet the minimum threshold. In this case, the employer may have to pay $3000 annual excise tax per full-time employee who purchases coverage from a marketplace and qualifies for a tax credit.
Clearly, the calculation of FTE’s an organization maintains is critical for avoiding these penalties, especially for those that hover around 50 employees for the measured time period. Large companies may face penalties amounting to hundreds of thousands of dollars if they lack adequate means of managing ACA requirements.
Human Resource Information Systems
HRIS technology has emerged as one of the most effective means of managing full time employees and calculating FTE for purposes of meeting strict ACA compliance measures. Aside from offering HR benefits collecting and managing data on payroll and employee benefits, the time and attendance functions help large employers avoid the significant penalties for ACA non-compliance.
While the ACA is still in its early stages in some areas and not yet fully implemented in others, it’s clear that companies and HR departments must adapt their processes for collecting time and attendance records. Paypro offers an array of HR solutions and tools that streamline the reporting process, thereby helping companies meet the requirements of ACA provisions. To learn more on how we can help with ACA reporting and other requirements of the Affordable Care Act contact us to request a consultation with one of our workforce management experts.