The ACA and Employer Mandates. They’re Back!
Are You Ready?
With the first tier of the “postponed” ACA employer mandates just around the corner, (January 1, 2015), large employers (defined as employers with 100 or more employees) are once again getting poised to offer healthcare insurance to their eligible workforce or be subject to penalties. This time the requirement is that 70% of their eligible employees need to be offered coverage – a slight break to account for issues with Medicaid eligible employees. Less large employers (defined as employers with 50-99 employees) have until January 2016 for the employer mandates to kick in.
It has been a long winding road getting us to this place with regulatory guidance filled with potholes of uncertainty and confusion. There are over 15,000 pages of rules and another 45,000 pages of guidance. The delay in the employer mandate gave regulators one more year to clarify their intent, and those of us in the staffing industry one more year to prepare ourselves and our clients for what lies ahead. Most of us are just now getting back into the ACA saddle. With the new deadline only six months away, we need to start our readiness count down now!
As a context for our clients with large flexible workforces, there are several unique features of the ACA that are specific to the staffing industry and need to be shared with our customers as part of their readiness process. We are subject to the law as are all employers – but the difference is that most staffing companies have further to go to become compliant. As an industry we have never been benefit rich. Our workforces are short lived and transient, with most employees coming to us for interim work, with no expectation of benefits. The low levels of healthcare insurance specifically written for staffing companies fall well below ACA minimums and are being discontinued as we speak. The ACA will significantly impact our cost structures whether we elect to pay or play.
Your staffing provider faces three big challenges which hopefully by now they are discussing with you. They face the challenge of 1) new cost structures that are likely not absorbable, 2) limited access to insurance solutions that fit the needs and requirements of flexible workers, and 3) an enormous amount of new administrative complexity. Not all staffing companies will have the capacity to comply with the new ACA regs, even if they wanted to.
Most of our issues as well as some of our customers revolve around issues of employee eligibility – who is and who is not eligible to receive benefits. Our employees work for our clients in so many different ways – short, long term assignments, full time, part time, auditioning for hire, project work, day labor – it is hard to get our arms around who will not be considered full time, eligible for benefit coverage at point of hire.
In the last three months, regulators have offered several new employee classifications that are exempt from ACA mandated coverage:
Seasonal Employees – employees who have been hired into positions where the customary duration of the job is six months. Agriculture, retail, and other highly cyclical industries will not be required to offer coverage to employees who meet the “seasonal” requirements.
Part Time Employees – employees who work less than 30 hours a week. While some employers, like Home Depot and Trader Joes, have announced plans to cut back the hours of work for all their part time staff to contain their benefit costs, other employers like Starbucks, Costco etc. have renewed their commitment to provide benefits to their large and loyal part time workers.
For staffing companies and their customers, greater attention must be given to nailing down the actual number of hours our employees will be required to work each week so as to properly classify them as part or full time employees. An employee’s classification as either full or part time while working on assignment can impact your bill rate your staffing provider has to charge you just to cover increased costs!
“Variable Hour” Employees – are employees whose hours of work or the duration of their ongoing work assignments are such that we cannot be “assured” they will average 30 hours of work each week for the number of weeks in the “measurement period” used to baseline the employee’s work patterns. Measurement periods can vary from no less than 3 months to no more than 12. Most employers will elect the 12 month measurement period option.
The “variable hour” employees is the classification most applicable to staffing company employees but is also the most difficult to administrate. While on the surface most temp and contract workers are by definition “variable,” the IRS requires the staffing agency to classify each employee as either “full time” or “variable hour” at the time of hire, considering several factors which they have listed in examples and regulatory comment.
Get it wrong and not offer benefits when you should, your staffing company can face serious penalties. Get it wrong and offer benefits not required, and your staffing company’s costs can sky rocket, making significant price increases to you, a given.
The gain for both you and your staffing provider comes when employees can legitimately be classified as “variable hour” employees because of the unique position they have under the ACA mandates. Employers are not required to offer variable hour employee’s healthcare benefits until their “measurement” period is completed – which can be a delay of up to 13 months. The “variable hour” employee provision can be used to contain costs but only if specific administrative and eligibility requirements are met at the point of hire.
At minimum, employers should expect their staffing providers to work with them to make changes in how they place requests for staff. In the bigger picture, it is more important than ever for employers and their staffing providers to work together to ensure ACA compliance while keeping a sharp eye on ways to contain unnecessary costs!
The PACE Staffing Network is a network based recruiting and staffing company headquartered in the Pacific Northwest with particular expertise in the development and management of flexible workforce strategies. The ACA is of particular interest to us because of its projected impact on workforce organization and cost containment strategies. Our goal is to help employers become ACA compliant while taking full advantage of the special provisions of the law that can provide competitive advantage. For more information on the ACA and its impact on your company contact us at 425-637-3312 or e-mail us at firstname.lastname@example.org.
This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.