The Affordable Care Act has gone into effect for employers with over 100 employees! As 2015 begins, the look-back period starts. The IRS is using this time to determine whether or not an employer is required to provide healthcare coverage for its employees or for employers with 50-100 full-time equivalent employees. The IRS can request the payroll detail of a firm for several months during the year depending on its company nature or business cycle. For example, in the case of Arizona employers, the IRS may forego requesting summer months from a restaurant, when business and employee hours are down. Another important detail of the ACA is that it must be offered to all employees in the company, regardless of their number.
ACA and Part-Time Employees
To determine the number of full-time employees, an employer adds up the total number of hours worked in a month by part-time employees, divides the total part-time employee hours by 120, and adds that number to the number of full-time employees. A full-time employee for any given month is an employee who is employed for an average of at least 30 hours of service per work week. Additionally, an employer should also consider part-time employees (from the preceding calendar year) in determining whether it is classified as a large employer. All employees, including seasonal workers who were not employed for an average of at least 30 hours per week for a calendar month in the preceding calendar year, (PT EE’s) are included in calculating the number of full-time equivalents for that calendar month.
Alright. Take a breath. We understand that is a lot of complication to deal with (and would love to save you the headache).
Let’s break it down with an example (warning: math ahead):
A company has 35 full-time employees and 20 part-time employees. The part-time employees all work 24 hours per week (every employee who works 24 hours a week equals 96 hours per month). The part-time employees hours would be counted as the equivalent of having 16 full-time employees using the following calculation:
x 96 hours per month per employee
divided by 120
Subsequently, 1920·120 equals the equivalent of 16 full-time employees at 30+ hours per week.
Employers with multiple EIN’s also need to be aware of the rules and requirements under the ACA. The IRS defines this as Common Ownership. Their definition is the same with five or less individuals owning at least 80% of the companies. If they have common ownership, they will be considered one company for the purpose of healthcare reform. For example, if John Smith owns three separate companies, the law combines the employees from his companies to calculate full-time equivalents.
Widget, Ltd. = 25 Employees
Acme Co. = 14 Employees
ABC, LLC = 12 Employees
Since the cumulative employee total equals 51, it is for that reason that health care coverage must be offered to employees in all three companies.
ACA Law Accurate Records to Verify
The ACA law also requires that you have accurate records to verify if the employees are full- time or part-time. Because the IRS can request the information for any 90-day period during 2015, employers need to be prepared for these new requirements.
PayTech has developed an ACA Report which meets the mandatory requirements set forth by the IRS if a company is contacted to provide data on the look-back period. Additionally, PayTech’s custom ACA Report provides our clients with the information they need to stay in compliance regarding safe harbor laws. Accordingly, the safe harbor calculation is used to determine if the health care offered is actually affordable.
ACA Compliance and New Regulations
If you feel your company may benefit from this report to maintain compliance with these important new regulations, please contact Julie Harms at (602) 900-8807 or by e-mail at Julie@pay-tech.com, for more information. We know this can be a complicated process! Give us a call to make it easy!