Affordable Healthcare – ACA Smart

Long Term Disability and Health Insurance

by Jeanne Knutzen | February 24, 2015

0 Affordable Healthcare – ACA Smart

By Strategic HR Inc. Question: I have an employee that is on long term disability. How do I handle their health insurance benefits since they are no longer actively employed? Answer: Ideally, employers should address this in their employee handbooks prior to such an event happening so they have a clear practice in place before such a stressful situation arises. Determining how benefits are handled while someone is out on any type of leave should be clearly defined. In most instances, employers continue to carry employees on health insurance for a pre-determined time period after going on a leave. There really is no "typical" time period, but regardless of what you choose, ensure that your insurance carrier will allow the continued coverage. Some employers terminate coverage as soon as the disability is approved; others after six months of LTD; and even some that agree to cover those on disability up to one year. In these situations, employers typically require the employee to pay their "normal" employee contribution for health care and the employer handles them just like an active employee – subject to the carrier agreeing, of course. Keep in mind that after coverage is terminated, if you are subject to COBRA you must offer COBRA coverage for the employee as well. Regardless of the length of time you agree to continue coverage, be sure to get approval from your insurance company and be consistent in your application of the continued benefits. Strategic Human Resources, Inc., is a national full-service HR management firm based in Cincinnati, Ohio. Our president and founder, Robin Throckmorton, can be reached at Robin@strategichrinc.com

What’s New in Staffing and ACA Compliance?

by Jeanne Knutzen | November 24, 2014

0 Affordable Healthcare – ACA Smart, Legal Issues - Staffing

A Complimentary Webinar for the Clients and Friends of PACE Staffing Network! MARK YOUR CALENDAR – December 10, 2014 @ 9 AM (PST) After compliance, learn what comes next! Featuring nationally acclaimed ACA attorney, Alden Bianchi. The Affordable Care Act radically restructures how heath care is funded. In 2014, its mandates impacted individuals. In 2015, its mandates impact employers. For the staffing industry and its customers, Obamacare represents the biggest compliance challenge our industry has ever faced. It impacts all of us who do or utilize staffing services—agencies and customers.   The PACE Staffing Network, in conjunction with the Affiliated Staffing Group, has arranged for Alden Bianchi, a nationally recognized expert on the ACA and the Group Practice Leader for Mintz Levin’s Employee Benefits & Executive Compensation Practice to present a complimentary webinar for PACE customers and friends on Wednesday, December 10 from 9am-10:15am PST. Click here to register! Webinar topics will include:

  • The increased costs of the ACA mandates and what they are likely to mean for your 2015 staffing budgets.
  • Staffing company costs and price adjustment strategies. What’s going on in the staffing services marketplace?
  • Risk Management – things to do to protect yourself from unforeseen fines and penalties
  • The “Variable Hour Employee” and what that classification means to the customers of staffing agencies
  • What are the strategy “don’ts” under the ACA? When might the IRS come calling?
  • Getting ready for the ACA’s discrimination provisions, and the next round of ACA impact.
  • Staffing Strategies you can use to contain the high costs of ACA compliance while focusing on your business needs
  • The ACA and your 1099 Workforce
  • And More!
If you have any questions regarding this webinar, please email infodesk@pacestaffing.com or contact Reilly Smith at 425-637-3312. Click Here to sign up for this complimentary webinar

Co-Employment – An Over Used Scare Tactic or a Must See Reality Show?

by Jeanne Knutzen | November 24, 2014

0 Affordable Healthcare – ACA Smart, Hiring - Best Practices Affordable Care Act, Affordable Healthcare – ACA Smart, Co Employment, Employee Benefits, Employee Hiring Decision, Employee Placement, flexible workforce strategies, Workplace Harassment

With the launch of the employer mandates of the Affordable Care Act in January 2015, staffing agencies and their clients have one more reason to worry about co-employment. While the ACA clearly states that only the “common law” employer is responsible for “offering insurance,” and case law strongly supports the notion that the staffing agency is the “common law” employer, what happens if your staffing agency doesn’t offer ACA mandated benefits as required by law. Is there any way you might be liable for fines or penalties? Questions about co-employment get triggered any time two parties share rights and responsibilities inside the traditional employer relationship which is the case with all staffing arrangements involving a third party staffing company and their clients.

  • Most staffing companies recruit and screen candidates, conduct background and reference checks, pay wages, calculate and pay wage related taxes and benefits, complete required reports, and retain at least some right to hire and fire an employee.
  • Most of their employer clients take on the responsibility of supervising, directing, and controlling the employee’s daily activities.
What creates confusion is when the client starts to specify pay rates, directs the hire or fire of employees, or involves themselves in administrative processes that should only be performed by the staffing agency. Since I’ve been in the staffing business, I’ve heard it countless times, “Don’t do ______________, or you will create an issue with co-employment.” And the “what we can’t do” has ranged from “allow our temporary employees to attend a client’s company meeting” to “allow an employee to work on an assignment for no longer than a (year, six months, or other time period “du jour”). Some of these “rules” have blurred the fact that co-employment covers many different types of overlapping liabilities—some that need to be avoided; some requiring co-management and partnership. Here are some of the co-employment scenarios we see on a regular basis and our somewhat common sense approach to how we look at each: Employee Placement/Hiring Decisions “I’m Perfect” (IP) Staffing Agency recruits and screens candidates for “I’m Even More Perfect” (IEMP) client for a 3-month technical help desk role. IEMP refuses to interview Julie, an African American female who appears to meet most, if not all, screening requirements. IEMP chooses instead to interview and hire Andrew, a Caucasian man. Julie believes she has been discriminated against because her application was not considered. Without IP’s awareness, Julie files a complaint with the EEOC. What will the investigator want to know about the roles of IP and IEMP?
  • What reasons were given to IP about why IEMP didn’t interview Julie? Were those reasons valid? Staffing companies who do not ask their client to disclose reasons for considering or not considering each candidate submitted for a job and employers who do not provide those reasons, often leave themselves open to charges of (unfounded) discrimination.
  • What screening requirements did IEMP give to IP? Were all of IEMP’s screening requirements job relevant? Screening requirements that aren’t clear or are so broad that everyone is lead to believe they are qualified, are asking for trouble. Establishing job relevant screening criteria is a joint responsibility of the staffing agency and their client.   
If IEMP’s hiring manager requested only male Caucasians and IM complied with that request, both parties are liable for that violation. If IM rejected IEMP’s illegal screening request and refused to work their request, only IEMP is liable. If IM rejected IEMP’s illegal screening request, but continued to work the request even when the client was discriminating, IM would be considered complicit. In today’s world, claims of discrimination rarely stem from overt acts of discrimination. Usually, they stem from perceptions of impropriety created by poorly designed or improperly executed screening processes. Both the staffing agency and their clients should be reviewing all recruiting and selection processes regularly to ensure that what they are doing is free of unintended consequences. Claims of Workplace Harassment… …often happen because employees don’t know who to talk with about things bothering them at work. George is 60-year-old Caucasian male working for IM, but being supervised on a daily basis by Andrea, a “20-something” supervisor who works for IEMP. Andrea is constantly harassing George about how he doesn’t fit in, and accuses him of “being slow” even though he is meeting all production requirements. George is frustrated but doesn’t know who to talk with about his concerns. He can’t go to Andrea; he goes to the Washington State Human Rights Commission. Who’s at fault? Clearly any staffing agency who doesn’t set up a formal process to receive and manage employee “concerns” is asking for a problem that can impact both themselves and their client. Most investigators consider the question “did they know” less important than “should they have known” and if IM doesn’t have clear communication policies for their employees, they are subject to liabilities stemming from workplace harassment. If, on the other hand, IM went to IEMP with George’s issue and IEMP chose not to do anything about it, it is only IM who would have a valid defense, not IEMP. Access to the Client’s Benefits As we learned from the early 90’s Microsoft settlement (90 million+ paid to its temporary and contract workers), if employers don’t adequately spell out the employees who will and will not be covered under their benefit plans, they can face serious and unexpected benefit liabilities. But avoiding unwarranted claims of benefit entitlement is not about shortening assignment lengths or requiring “breaks in service”—it’s about making sure benefit plans clearly spell out who is and is not eligible for benefits, specifically excluding employees from all third party employers. Unfortunately the core reasons behind the Microsoft settlement were never fully understood by the business community and ended up putting a whole lot of Microsoft staffing policies into mainstream HR policy without a clear understanding of what might have been an easier, less costly, solution.    Co-Employment and the Affordable Care Act… …should be as simple as making sure all contracts with staffing providers clearly state (affirm) the agencies role as the common law employer and their responsibility to administrate all ACA related requirements. This means that while it may be of interest to an employer whether or not their staffing agency is “playing or paying,” and who they would be offering benefits to (or not) they would not want to involve themselves in those decisions.    I-9. Immigration. Privacy Issues. Your staffing agency is responsible to administer the I-9 process. If they purposefully or thru negligence place an illegal employee into your workforce, they are liable for that violation. If an employer becomes aware of this practice, and fails to take action, they would be complicit in the violation and fined accordingly. If an employer stipulates that only US citizens work for them, they would be subjecting themselves to claims of discrimination based on national origin. Additionally, if they require copies of I-9 documents or any materials that include social security numbers, they incur risks of violating certain “privacy” requirements which could result in significant and costly damages (ex. identity theft, etc.). In general, employers should stay at arms length from any administrative process used by their staffing agency including how they administrate qualifications to work, pay and benefits. FMLA. ADA. Accommodation Issues. The co-managed version of co-employment is definitely alive and well when it comes to most FMLA and ADA requirements. If an issue or need comes up, particularly on a long term assignment, both staffing agency and their client are responsible for providing employees with time off to address a medical issue (FMLA) or to provide an accommodation (ADA).  Safety. All employers, both the staffing agency and their client, are responsible to provide a safe and hazard-free work environment for their employees. While the lion’s share of that accountability lies with the client, a staffing agency cannot knowingly assign its employees to work in environments where there are known violations of OSHA standards. As a matter of routine, staffing agencies should be inspecting their client’s worksites, ensuring that OSHA standards are being followed; that the work is being properly described and that employees are being issued the appropriate clothing, equipment, and instruction to ensure their safety. An employer’s safety record is a matter of public record and should be reviewed by the staffing agency before assigning an employee to begin work. Staffing agencies and their clients will typically work together to address any and all safety issues as they are revealed. Staffing agencies, who are concerned about an employer’s safety practices and repeated failures to act to remedy known issues are duty bound to remove employees from those assignments. Property Damages Frank is working in an IEMP warehouse, placed by IM. Frank drives a forklift and accidentally drives it into a wall, destroying $25,000 in product and doing another $10K in damages to the wall and the forklift. Who pays for the damages—IM or IEMP? Here are the factors that will likely make a difference to the final outcome:
  • What does the contract between IM and IEMP say should happen? Typically these contracts indemnify the other from acts of negligence—so who’s at fault? Which party was negligent?
  • Did IEMP require that IM screen Frank be a qualified forklift driver? Did they disclose that he would even be driving a forklift?
  • What training or instruction did IEMP provide Frank before asking him to drive a forklift?
  • How closely did IEMP supervise Frank’s work on the forklift?
If Frank was in an administrative or professional role, his damages might be different (ex. a violation of confidential information), but the considerations are the same:
  • Did IM screen Frank for a job that required him to handle confidential information?
  • Did IEMP properly protect the information they needed to be kept confidential?
  • Did IEMP properly instruct and supervise Frank on how to handle confidential information?
For more information on co-employment or how to implement flexible workforce strategies that minimize the impact of unforeseen co-employment liabilities, contact PSN at infodesk@pacestaffing.com or by calling 425-637-3312 to arrange a complimentary consultation with a member of our Partnership Development Team. jeanneThis article is intended for general informational purposes only and in no way is intended to provide legal advice or to circumvent the need each employer has to seek competent legal counsel. This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.          

Countdown to ACA Compliance – Part III

by Jeanne Knutzen | October 28, 2014

0 Affordable Healthcare – ACA Smart, Legal Issues - Staffing, Managing People. Team Leadership ACA and Temporary Staffing, ACA compliance, Affordable Healthcare – ACA Smart, Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, Hiring Bellevue, Hiring Everett, Hiring Seattle, Hiring Tacoma, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

The PACE Staffing Network has been preparing for the employer mandates of the ACA for well over two years. As members of the American Staffing Association (ASA), we provided input into several areas of proposed regulation, and attended countless hours of ACA related training. With the ACA’s employer mandates ready to launch January 1 2015, we wanted to share information on the specifics of how the ACA impacts your use of temporary/contract employees. For ideas on how to better manage your needs for staff in light of new ACA mandates, contact a member of our Partnership Development team by contacting infodesk@pacestaffing.com or calling 425-637-3312.

In what ways has the ACA already impacted your temporary and contract workers?  

The Individual Mandate has been in effect since 2014, requiring all temporary and contract workers to purchase ACA qualified insurance for themselves and their dependent children. While we do not know what percentage of temporary/contract employees complied with these mandates in 2014, we suspect that number will increase in 2015 as penalties for non-compliance increase.

What changes go into play in 2015?

The Shared Responsibility component of the ACA, known as the Employer Mandate, goes into effect on January 1, 2015. This provision requires that all staffing companies employing 100 or more employees offer affordable and ACA qualified insurance to 70% of its eligible employees or pay significant fines and penalties. The taxes/fines/penalties for not offering insurance are $2K/year ($167/month) per eligible full time employee—excluding the first 80; if the insurance offered does not meet ACA requirements or isn’t affordable, the fine/tax penalty is $250/month (up to $3K annually) for any employee going to the exchange for insurance and receiving a subsidy. This mandate will impact most but not all staffing companies in 2015.

Are most staffing agencies already offering insurance?

The short answer is YES. PACE along with most staffing agencies has been offering some form of health insurance for well over a decade. Unfortunately these health insurance products do not meet ACA requirements, so new products for our industry had to be developed over the last year.

What requirements must be met in order for a temporary or contract employee to become eligible for ACA benefits on January 1st, 2015?

There are several ways an employee can be qualified for coverage as of January 2015. Using a look-back period, any temporary or contract worker of a “large” staffing agency who has been on assignment through their staffing agency for at least 1560 hours during 2014 must be offered insurance. These look-back periods will continue on through 2015 so that all employees meeting the full-time requirement must be offered insurance within 30-days of the end of their look-back. For all full-time employees hired after October 1, 2014 they will become eligible for insurance on the first day of the month following the completion of their administrative period—no later than the first day of the fourth month from date of hire. Full-time employees are considered any employee intended to work 30-hours per week or more at the point of hire.

What must a staffing company contribute to the employee’s insurance costs in order to ensure “affordability?”

Staffing firms must contribute to the employees’ premium so that no employee is required to pay more than 9.5% of their base pay for their own personal coverage. For example, if an employee earning $10/hr. is offered an ACA compliant insurance plan that costs $400/month, the employee cannot be required to pay more than $123.50/month for their own coverage, requiring their staffing firm employer to pay $284.80.

How will newly assigned temporary and contract employees become eligible for coverage in 2015?

Starting in October, 2014, PACE will categorize all new hires as one of the following:
  • Full-time – working 30 or more hours per week and projected to work at least 1560 hours in the coming 12 months,
  • Part-time – working less than 30 hours a week, or
  • Variable hour – employees whose status as either full- or part-time can’t be determined at point of hire.
  • Seasonal – employees working 6 months or less at specific times throughout a calendar year.
While you might assume that all the employees we hire are either Variable Hour or Seasonal, there are very specific rules staffing companies must follow to put an employee into those categories. What’s at stake is that for employees categorized as Variable Hour, they are allowed to work for their employer for a defined “measurement period” (typically 12 months) without the benefit offer requirement. The IRS is not going to give this classification away easily.

How will most staffing companies decide to become compliantwill they pay or play?

To be ACA compliant, a staffing agency can either offer benefits or pay the $2000 per employee “did not offer” penalty. They can also offer a qualified benefit but not participate in its costs, running the risk of incurring the $3000 per subsidized employee penalty for not making their plan “affordable.” Each approach to ACA compliance has offsetting costs and risks, requiring each staffing agency to choose a strategy that meets their customer’s needs for cost containment and their positioning in the marketplace.  The American Staffing Association commissioned a study by Towers Watson (2014) which provides insight into the choices likely to surface over the next 60 days. According to the TW study, 54% of staffing companies will be offering some level of insurance to its eligible temporary and contract workers. The remaining 46% are either planning to pay penalties or are too small to be covered during the transition year. A popular compliance strategy used by many staffing agencies, including PACE, will be to offer two insurance options:
  • A plan that meets both the “minimum value” (MVP) and the “minimum essential coverage” (MEC) definitionswith a 60% actuarial value covering core services. This plan will meet all the requirements of the employer mandate.
  • A plan that meets only the “minimum essential coverage” (MEC) definition – A less costly plan that meets only individual mandate requirements.
This strategy provides a low cost way for our employees to become compliant with the individual mandate (avoiding their own fines and penalties), while protecting PACE from penalties stemming from employees taking subsidies because our plans don’t meet ACA requirements or are unaffordable.

Do you need to know if and how a company providing temporary or contract staff to your organization is ACA compliant?

Theoretically no. Provided you have the right contracts and agreements in place you will have no responsibility for your staffing vendor’s decisions regarding how they will get and stay compliant with ACA mandates. Thinking more pragmatically, the expertise your staffing vendor brings to the table to not only ensure their own compliance with the ACA but to help you with yours, can be invaluable. First of all, a vendor who hasn’t prepared to become compliant can easily find themselves facing fines and penalties of a size that can end their business. Secondly, like most overly ambitious legal undertakings, the ACA contains opportunities for smart employers to use the provisions in the ACA to create new and more competitive ways of doing business. If staffing agency does not understand the ACA and its nuances, they likely won’t be able to offer fresh ideas on ways to lower your ACA related costs!

What will be the” added costs” for staffing agencies to become compliant with the ACA in 2015?

There are two categories of costs associated with ACA compliance:
  • The increased costs of ACA related administration which will be considerable—starting with changes in point of hire administration, monthly reporting, annual reporting to both employee and the IRS, etc.
  • The increase in direct costs associated with either offering the required insurance coverage or paying the penalties associated with not offering.
The direct cost increases will be agency specific, depending on several factors:
  • How many "full-time" employees they have in their workforce relative to their total workforce?
  • What percent of their eligible full-time employees will take the insurance once offered?
  • The eligible employees rate of pay to arrive at the costs the agencies will incur to make their plan "affordable."
  • The costs of the insurance products they are offering.
Based on the costs we are currently projecting, PACE is anticipating a 3-5% increase in our direct costs with another 15% increase in our current administrative costs.

For staffing companies who elect to “pay,” are they subject to taxes/penalties on all their temporary employees?

No. The application of taxes and penalties for “not offering insurance” only applies to full-time employees (minus 80 in 2015). Excluded from penalties for unaffordable insurance are employees who either reject an offer of coverage, elect coverage that isn’t affordable or delivering minimum value, or who are enrolled in state Medicaid programs.

What ACA related costs are still unknown/unclear?

Historically, the staffing industry has faced serious challenges finding a health insurance product that will serve their high turnover, low participation workforces. Six months ago there were no insurance products available to the staffing industry that would meet ACA actuarial standards. We now have insurance products, but it is not clear if these products will be attractive enough to our temporary and contract workers to incent their participation. We’ll all know much more in six months than we know now about what percent of the people being offered insurance will chose to take it.

How will the individual staffing company deal with their cost increases?

There are as many different pricing philosophies and strategies as there are staffing companies—with the key factors being geography, local business and government taxes, employee type, market positioning, and service offerings. While the pricing structures of staffing companies providing long term professional staff typically have room for premium level healthcare benefits, for staffing companies working in more competitive markets, there is little room to absorb any increased in direct costs. Some staffing companies will offer only the low cost MEC plans, taking the chance that the employees electing their insurance will not go out to the exchange and seek subsidies for better plans. We consider this strategy risky. The ASA study by Towers Watson study revealed that 91% of the staffing firms polled are planning on passing their ACA costs (penalties or insurance costs) back to their clients in the form of across the board increases in bill rates. Most (38%) are planning 2-5% increases. 9% are looking to increases of 16% or more. 19% are still not yet sure how much they will increase bill rates.

How will the price increase be handled?  

Most of the pricing programs we have viewed are designed to smooth out the costs of providing insurance to all eligible employees and spreading those costs across an entire workforce and customer base.
The Towers Watson study indicates that employers can expect their price increase to come in a number of forms. Some will simply do an across the board increase in bill rate; others will see increases in mark ups; some will be adding a line on each invoice for ACA Costs.

How will the increased costs of temporary and contract workers compare with the increased costs associated with the ACA for other types of employees?    

Since the passage of the ACA, actuarial firms have been predicting increases in overall employee costs to be in the area of 5-8%. If this projection plays out, the per hour increase in costs for a temporary or contract employee may end up being much less than the increase in costs associated with the same employee, hired directly. For example, an employee earning $15/hr. hired directly may cost an additional $3.25-3.75/hr. in healthcare benefit costs in 2015 compared to 2014. The same employee provided by a third party staffing agency, might cost $.45-.70 more per hour than they did in 2014. For a more detailed discussion of ACA related “staffing math” and to compare the relative costs of employees hired directly with employees placed through a third party employer, contact our Partnership Development Team at 425-637-3312.

What other cost increases will employers experience in 2015?

We anticipate ACA related cost increases will touch just about every part of our customers’ businesses in 2015. Administrative cost increases alone could be staggering.
Part of the services and costs savings we are delivering to customers in 2015 and beyond is full administration of ACA related compliance.

When it comes to managing staffing providers, are there other elements of the ACA that employers should be paying attention to?

Yes. It may be time to review your staffing contract or agreements. The ACA has its own common law provisions, reinforcing the notion that it is the common law employer who is responsible to offer and pay for ACA mandated benefits. In most temporary or contract staffing arrangements, there is clear legal precedence for the staffing company to be the common law employer, accountable for ACA compliance. That said, we recommend that employers consider adjusting agency contracts to clearly spell out each party's respective roles in managing ACA mandates. PACE is happy to provide language recommendations upon request. For employers purchasing payroll services from their staffing provider, the law is less straight forward and the need for contractual adjustments more important. Again, we recommend that the role of your third party payroll service provider be spelled out clearly and contractually in any ongoing payroll services agreement. We recommend that specific indemnifications related to the ACA liability should become standard clauses of all payroll service agreements and contracts. NOTE: A nuance of the ACA regs specifically requires that if there is a chance or a reason for a payroll agent to not be considered the common law employer, the costs of providing insurance to an ACA benefit eligible employee should be passed back to that client as an increase in rate for the particular employee. Between now and early January, PACE will be speaking with all clients to ensure the proper ACA compliant contracts are in place.

Do we need to be concerned about “abuse” clauses?

The IRS has been very clear that it will be looking closely at staffing firms and their clients to ensure that ACA benefit requirements are not purposefully skirted. For example, an employer who turns their entire 50 person workforce over to a staffing firm, so as to avoid falling into the “large employer” category, would be highly suspect. An employer who employees 48 people and regularly uses a staffing company to provide 5-10 employees for its peak busy periods, on the other hand, is likely not suspect, even though their use of temporary staff keeps them below the 50 employee benchmark. The difference? Their temporary staffing strategy was designed to address a business need—not to avoid offering benefits. Splitting employees between a staffing company and their client or between two staffing companies so that no one “employer” reaches the 50 employee benchmark has been specifically prohibited. While PACE will continue to be strong advocates for all of the business reasons to use more flexible staffing strategies, we will only recommend changes that are based on business need, not ACA avoidance.

Is there future ACA stuff that we should be thinking about for 2016 and beyond?

Yes.
  1. Discrimination Issues. Current thinking is that all the ACA specific regulations related to discrimination will come out in 2015 and be implemented in 2016. The ACA is clear that any plan or employer contribution that provides a differential benefit in favor of highly compensated employees will be specifically disallowed. This means that once discrimination regulations have been written and put into play, employers will no longer be able to provide special plans or higher levels of contribution to their higher paid employees—short of making them available via post-tax dollars.
  2. Special tax on Cadillac Plans. In 2018, employers will be taxed on Cadillac benefit that cost more than $10,200 ($850)/month per individual. The tax on Cadillac plans is 40%—making these plans prohibitive for most employers. Employers with Cadillac plans will likely look for alternative approaches.
We hope you have benefited from reading this primer on the ACA and how it will impact your use of temporary and contract workers after January 1, 2015. For more personalized consultation, please contact our infodesk@pacestaffing.com or by calling 425-637-3312 to arrange an appointment with one of our ACA Specialists.
jeanneThis article was prepared by Jeanne Knutzen, CSC, the President and Founder of the PACE Staffing Network. PACE remains committed to full compliance with the ACA and offers a variety of staffing products and services designed to ensure that our clients have options for containing the costs associated with ACA compliance. For a confidential discussion of how these services might be applied to your workforce, particularly your temporary and contract employees, contact a member of our PSN partnership team at infodesk@pacestaffing.com or 425.6376.3312.    

Countdown to ACA Compliance

by Jeanne Knutzen | September 23, 2014

0 Affordable Healthcare – ACA Smart, Legal Issues - Staffing Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, hiring, Hiring Bellevue, Hiring Everett, Hiring Seattle, Hiring Tacoma, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

Part II. ACA Requirements and Penalties - 2015! Yes, the 2,300 pages it took to write the law, followed by the 10,000+ pages of regulatory interpretation can be daunting, but with the January 1st launch of our transitional year just around the corner, we are taking the time to boil down the complication into the “critical few”—things our clients MUST KNOW about what lies ahead. In Part I, we provided a complete glossary of ACA terms—just so you would have a playbook. In Part II, we are providing a simple outline of employer and employee requirements for 2015.

  • Employer (Shared Responsibility) Requirements: In 2015, employers with 100 or more full time employees (or full time equivalents) must offer a healthcare insurance plan that provides Minimum Essential Coverage (MEC) to 70% of its full time employees and their dependent children or be subject to “failure to offer” penalties described below.
  • Individual (Shared Responsibility) Requirements: As in 2014, individuals must enroll in a healthcare plan that provides themselves and their dependents with MEC level coverage. If they do not obtain MEC insurance, either through their employer or Medicaid, they are required to purchase an ACA approved plan through a State or Federal Exchange—in Washington we have a “working” Exchange.
  • Employer Penalties: It is important for employers to distinguish between two important differences in mandated plans:
    • MEC/Minimum Essential Coverage plans are typically very low cost plans that meet both the individual and the employer mandates.
    • MVP/Minimum Value Plans are most costly plans that must meet ACA actuarial value standards in addition to “affordability” standards. Most MVP plans will meet MEC requirements, but not vice versa, making employers subject to two types of penalties.
1. Failure to Offer Penalties. Employers who fail to offer a MEC plan to 70% of their eligible employees (and their dependent children) will pay a monthly tax/penalty of $167 or $2,000/yr.—for each eligible fulltime employee. This tax/penalty is calculated on your entire eligible workforce and will include all those employees who have been offered and accepted coverage. Deductions: In 2015, you can deduct 80 employees from your count of eligible employees. In each year after 2015, you can deduct only 30. For example, in 2015 if you have 100 employees working for you in a month and do not offer coverage to at least 70 of those employees, your monthly penalty will be based on 20 employees (100 minus 80) calculated at $167 each for a total of $3,340 tax or penalty each month you fail to offer. 2. “Inadequate Plan” Penalties. If the plan an employer offers is either “unaffordable” or does not provide “minimum value” (MVP) the tax/penalty per month for employers increases to $250/month (up to $3K annually). This penalty is unique and much more complicated to administrate in that it is applied only to those employees who seek and are granted a government subsidy as a result of applying for insurance on a State Exchange. If an employee is offered both a MEC and MVP plan and EITHER refuses both, or ELECTS only the MEC option, they WILL NOT BE ELIGIBLE FOR A SUBSIDY. NOTE: Most employees are not aware of this special provision of the law and may enroll in a low cost MEC plan believing that by enrolling they will become compliant with the individual mandate while preserving the option of receiving subsidies at a later date. An employee who has been offered both MEC and MVP coverage and elects the lower cost MEC coverage, loses their eligibility for subsidy. 3. Individual Penalties/Taxes/Fees: For your employees, the penalty (technically referenced as a tax or fee) for failing to obtain the required insurance coverage is either a flat dollar amount per person or a percentage of household income. These penalties are already in effect for 2014, but go up significantly in 2015.
  • In 2014: the penalty is $95 per person, $47.50 per child (up to $285 per family) or 1% of household taxable income, whichever is greater.
  • In 2015: the penalty is $325 per person, $162.50 per child (up to $975 per family) or 2% of household taxable income, whichever is greater.
  • In 2016: the penalty is $695 per person, $347.50 per child (up to $2085 per family) or 2.5% of household taxable income, whichever is greater.
  • In 2017 and beyond: the penalty will be the same as 2016 with Cost of Living increases.
4. Your Employee’s Eligibility for Subsidies: Individuals with household incomes determined to be 100-400% of federal poverty levels may be eligible for government funded subsidies to buy their insurance. Employees become ineligible for these subsidies if:
  • They are already on Medicaid.
  • They have been offered and refused an employer’s offer of a healthcare plan that is both affordable and meets MVP requirements.
  • They purchase insurance through venues other than a “qualified” Exchange—in our case the Washington Exchange.
In 2014, the poverty level for an individual is $11,670, which means that for families of four, subsidies will likely be available if the family earns anywhere from $23,050 and $92,200 annually. The eligibility boundary for 2015 is not yet available, although current estimates are that in 2015 over 26 million people will be eligible for subsidies. 5. Discrimination. The regulations relating to the new discrimination provisions embedded in the ACA have not been written and the IRS has promised it will not enforce any of its discrimination provisions until regulations have been published. We know that sometime in the near future employer funded plans will become subject to tests ensuring that differential treatment not be awarded to highly compensated employees, but it is the nature of these tests that has not been determined. Employers need to be paying attention to these regulations likely to be published in 2015 as the challenge of avoiding discrimination will be a significant cost management issue for employers with diverse workforces and an historical pattern of providing unique benefit options to their highly paid employees. In the meantime, in 2015 employers will be able to offer different plans to different employee groups and can contribute differently to employees based on “their group.” If the plans offered meet MEC, MVP and “affordability” tests, typical tiered/pay up plans are allowable in 2015 without risk of penalty. 6. Record Keeping. 2015 adds several new layers of administrative and reporting requirements for ACA defined “large” employers (50 or more employees), regardless of whether or not you are subject to the employer mandates in the 2015 transitional year. Notices to Employees. Since October 2013, all “large” employers have been required to provide new hires with a statement of their eligibility for coverage that they can either obtain through you or the Exchange. The IRS has made this compliance requirement easy to administer by providing samples of required letters. They are available for download via the IRS website: http://www.dol.gov/ebsa/healthreform/regulations/coverageoptionsnotice.html Forms 1095 C. In accordance with section 6056 of the IRS code, employers offering a self-insured MEC plan AND employers considered “large” under ACA standards will be required to report annually on all employees who worked for them as a full time employee for at least one month during 2015 and each reporting year thereafter. These reports, using Form 1095-C need to be prepared monthly throughout 2015, but will not be submitted to the IRS until March of 2016 (if filed electronically). Form 1095-C must be submitted to employees by end of January 2016.
  • The data required, organized by month, includes:
  • The number of full time employees (each month).
  • The name, address, and SSN of each full-time employee (each month).
  • The months during which coverage was available.
  • A certification, month by month, of the employer size.
  • A certification, month by month, as to whether the employer offered the full time employee (and his or her dependents) the opportunity to enroll in employer-sponsored coverage.
  • The amount the employee would need to pay if they accepted the lowest cost monthly premium (for self-funded programs only).
  • The months, if any, during which the employee was covered.
Forms 1095 B. The ACA also added section 6055 to the IRS Code, requiring all insurers and self-insured employers providing minimum essential coverage (MEC plans) to submit annual reports (Form 1095-B) identifying the costs of their plan and who was covered. If you are an employer who offers a fully insured group health plan, your insurance issuer is required to submit the returns, but if you offer a self-insured plan, you are required to submit the returns (even though a third party may prepare the return). Employers are generally subject to penalties for failure to file Forms 1095 -B and C; although the IRS has said that in 2015 they will not impose penalties for incomplete or incorrect information if the employer made a good faith effort to comply. W-2 Reporting. The requirement to include the costs of certain healthcare benefits on the employees W-2 at the end of each year has been in effect since 2012, but has only been loosely enforced. From 2013 on, employers filing 250 or more W-2 forms annually are required to report the total value of certain employer-sponsored health benefits to all employees receiving this benefit. The amounts reported are strictly informational and have no impact on the employee’s taxable income. In Part III of our Countdown to ACA Compliance, we will be discussing the special provisions of the ACA that apply specifically to temporary and contract workers—our specialty. There are provisions in the law that you should know about to protect yourself from unforeseen fines and penalties. jeanneThis article was prepared by Jeanne Knutzen, CSC, the President and Founder of the PACE Staffing Network. PACE remains committed to full compliance with the ACA and offers a variety of staffing products and services designed to ensure that our clients have options for containing the costs associated with ACA compliance. For a confidential discussion of how these services might be applied to your workforce, particularly your temporary and contract employees, contact a member of our PSN partnership team at infodesk@pacestaffing.com or 425.6376.3312.    

Countdown to ACA Compliance

by Jeanne Knutzen | August 19, 2014

0 Affordable Healthcare – ACA Smart, Legal Issues - Staffing ACA and contract staff, ACA and temporary staff, ACA compliance, ACA Definitions, ACA glossary, ACA vocabulary, Affordable Care Act and temporary staffing, Variable Hour Employees

Part I. A Glossary of “ACA Speak” With the employer mandate of the Affordable Care Act just around the corner (January 1st, 2015 for employers with 100+ FTEs), employers everywhere are facing the last round of ACA challenges. To make sure our clients and friends are tracking with ACA requirements, particularly those that impact their use of temporary or contract staff, we will be publishing a series of informational pieces about the ACA called “ACA Smart.” We will be identifying those provisions in the law that we know will drive up your staffing costs, but also the opportunities we see to drive down these costs by making adjustments in how temporary and contract staff are put to work. “ACA Smart” will also cover the operational policies we recommend employers put in place to protect themselves from unanticipated costs or penalties stemming from misguided co-employment protocols. In Part I of “ACA Smart,” we offer a dictionary of ACA terms - all those new words that will soon become part of the regulatory landscape. Key ACA Terms and Definitions Applicable Large Employer (ALE):  In 2015, refers to an employer with 100 or more full time equivalent employees. In 2016 will be adjusted to include employers with 50 or more full time equivalent employees. Only ALE’s are subject to the employer mandates and related penalties. Full Time Equivalent (FTE):  A term frequently used in the context of determining an employer’s size – the number of people they employee. When applied to a part-time or non-classified employee, it is used to determine what percentage of a full time employee each part-time worker represents. Employer Size:  The size of an employer’s workforce is determined by counting all full time employees and adding to that number a calculation of the aggregate number of FTEs stemming from part-time or non-classified (variable hour) employees. The FTE assigned to a part-time employee is calculated as a percentage of the number of hours actually worked during a month divided by 120 hours. For example, if a part-time employee works 110 hours, their FTE = .917 or 110 divided by 120. (Eligible) Full Time Employee:  Any employee who averages at least 30 hours per week (130 hours per month; 1560 hours per year). Only full time employees are required to be covered under ACA employer mandates. (Non-Eligible) Part-Time Employee:  Any employee who averages less than 30 hours per week (130 hours per month; 1560 hours per year). Part-time employees are not required to be covered by an employer, but must be included in a calculation of company. Seasonal Employees:  Employees working less than 120 days in a year for “seasonal” reasons. Seasonal employees are automatically excluded from ACA coverage. Variable Hour Employees:  Refers to employees who, at the time of hire, cannot reasonably be classified as either part or full time. Variable hour employees are classified as either part or full time depending on the number of hours actually worked during either an “initial” (IMP) or “standard measurement” period (SMP). Many temporary or contract workers, but not all, will be classified as “variable hour” employees depending on how the conditions of their assignment is described. Your staffing agency is responsible to classify each employee as full, part or variable hour at the point of hire. Ongoing Employee:  An employee who has been employed for at least one standard measurement period (SMP). Minimum Essential Coverage (MEC):  The requirement to be ACA compliant is a healthcare plan must cover certain healthcare basics – “the diagnosis, cure, mitigation, treatment or prevention of disease.” All individuals are required to purchase MEC compliant plans, unless they are covered by Medicare, Medicaid, Children’s Health Insurance Programs (CHIPs) or a Veteran based plan that is automatically classified as MEC compliant. MEC plans are also referenced as “skinny” plans. Of note, is that most of the healthcare plans currently available for temporary or contract workers are “fixed indemnity plans” that do not meet MEC standards. Minimum Value Coverage (MVC):  The requirement to be ACA compliant is a healthcare plan must cover over at least 60% of the overall costs associated with, 1) physician and mid-level practitioner services, 2) hospital and emergency care, 3) pharmacy costs, and 4) laboratory/ imaging services. Of note, is that prior to the ACA, most employer plans had an actuarial value exceeding 85%. The lack of availability of 60% plans in the insurance marketplace is a significant issue for all employers focused on containing costs. Affordability:  Refers to the ACA requirement that the employee’s share of the costs associated with their purchase of a healthcare plan for themselves (not their spouse or family) can be no more than 9.5% of the employee’s gross income. If an employee earns $2,000 per month, (approx. $11.60/hr.), they cannot be asked to pay more than $190/month towards their healthcare plan in order for the plan to be considered “affordable.” A plan costing an employer $400/month will, therefore, require that employer to contribute $210/month. Play:  Refers to the decision an employer makes to offer a healthcare plan that provides Minimum Essential (MEC) coverage to 70% of its full time employees and their dependent children under age 26 in 2015, 95% in 2016. NOTE: 1) It is not mandatory to offer coverage for spouses, only dependent children under age 26 and 2) employers who “play” are still subject to penalties if:

  1. their plan is not affordable,
  2. they fail to offer the mandated coverage to the required percentage of eligible employees, or
  3. if they do not offer coverage that meets Minimum Value requirements.
Pay – “Failure to Offer” Penalties:  Refers to an employer’s decision not to offer a MEC qualified plans, making them subject to penalties for “failure to offer.” The “failure to offer” penalty is assessed on the basis of the number of employees in the employer’s workforce otherwise eligible to receive coverage. Pay – “Unaffordable or Minimum Value” Penalties:  Refers to the outcomes of an employer’s decision to offer insurance that is either “unaffordable” or that doesn’t meet minimum value requirements. This penalty is assessed against every employee who goes to a State Exchange and receives a subsidy. Administrative Period:  Refers to the days of employment within which an employer is required to offer an eligible employee the mandated benefits. For new full time employees the administrative period is 90 days. For ongoing employees in a standard measurement or look back period, the administrative period is 30 days. Initial Measurement Period (IMP):  References a period of time starting with the date of hire and ending at a defined date based on the length of the IMP. An IMP is applied only to “variable hour” employees where their classification as either a full or part-time employee is determined on the basis of actual hours worked during the IMP. Benefits, where required, are offered in accordance with the applicable classification at the end of the IMP. Initial measurement periods (sometimes referred to as look back periods) can be 3-12 months, with the specific length of the IMP set by the employer. Standard Measurement Period (SMP):  References a recurring method and time period used to determine whether an ongoing employee is full or part-time. The SMP is fixed, usually based on a calendar year and must be the same for all employees in the same category. Unlike an initial measurement period, the SMP is a reoccurring event that starts at a specified date each year, independent of hire date. IMPs and SMPs may overlap. The Stability Period:  The period of time from the point of benefit offer where the employee must be provided benefits/coverage regardless of how many hours actually worked. Stability periods can be no less than six months and must match the IMP or SMP if it is six months or longer. For example, if an employer elects a standard measurement period of 12 months, the stability period must also be 12 months. Exchanges:  The mechanism through which insurers will be able to offer small employers (less than 100 employees) and individuals the ability to purchase health insurance. If a state doesn’t provide an exchange, the federal government is required to do so. Washington State has an exchange. Subsidies:  The credits available to individuals who qualify for assistance in order to purchase insurance coverage through a state or federally operated Exchange. The subsidy is paid directly to insurance carriers as a way to lower the premium costs for eligible individuals. Employees earning anywhere from 100-400% of the “poverty” level can be eligible for subsidies depending on number of dependents. In part II of our “ACA Smart” series, we will be covering the specifics of the ACA penalties – when and how they are assessed. If you would like a personal conversation with a member of the PSN partnership team to better understand the ACA and its impact on your flexible workforce strategies, contact our info desk at 425-637-3312 or by emailing infodesk@pacestaffing.com. Make sure your subject line references the ACA or “ACA Smart.”  

Taking the Mystery Out of Staffing Agency Bill Rates

by Jeanne Knutzen | June 25, 2014

0 Affordable Healthcare – ACA Smart Affordable Healthcare – ACA Smart, Agency Fees, Employee Costs, Marketplace News and Trends, Seattle Sick and Safe, staffing agency bill rates, Staffing Bill Rates, Staffing Costs, Washington Employee Costs

Pricing Primer Part I: All About Direct Costs, Mark-Ups and Service Fees! “You’ve got to be kidding… you are paying 'our' employee $20/hr. and billing us $32 – you must be rolling in dough!” How many times have we heard a customer share this "honest perception" of our business and wished it could be true? Yes, we'd like to set the record straight. But we'd also like to arm our readers with the facts about staffing agency bill rates so that when it comes to purchasing temporary or contract staff, you will know how to get the most out of your staffing dollar!   Let's start with the largest and most significant component of your staffing invoice - the costs associated with your staffing agency's employer requirements. We have learned that unless you are an accountant or payroll specialist, most customers simply aren't aware of what it costs in today's regulatory environment to be an employer - let alone what it costs a staffing company to be "the employer" on their behalf. In the state of Washington, DIRECT (statutory mandated) COSTS represent anywhere from 65-85% of a staffing agency's bill rate! And important to note is that these are the same DIRECT COSTS you would be paying if you hired the employee directly, which leaves only 15-35% of the bill rate to cover the actual services provided - sourcing, recruiting and assigning the temporary or contract worker - a percentage very different than most customers assume their staffing agency pockets for service and profits. Are you with me so far? We think that part of the misconceptions related to agency bill rates is created by pricing models that skip over DIRECT COSTS and focus only on bill rate. In some areas of professional staffing, for example, it is considered impolite for customers to inquire about pay rate, creating the false perception that all agency pay plans, service packages, or profit targets are the same - which is almost never the case. While the upside of a “bill rate" pricing practice is its simplicity - one number making it easy to shop and compare - the  obvious downside stems from this same simplicity and lack of transparency. Buyers often have no idea what their bill rate pays for and take no control over normalizing employee quality or service standards. Bill rate only pricing practices are typically confined to "one off" purchasing scenarios where buying decisions are based more on a supplier/customer relationship than market competition. A more popular pricing practice, designed to increase bill rate transparency and normalize pricing practices, is what is called a mark-up over pay rate pricing model. In these pricing models, the customer either sets or provides guidance around employee pay rates and asks staffing agencies to compete for business by quoting the mark-up over pay rate they will use to calculate the bill rate. This pricing practice is not without rationale. Mark-ups vary substantially between agencies and when normalized can have significant impact on overall agency costs. For example, if an employer specifies a $20/hr. pay rate and Agency A quotes a mark-up of 40%, the bill rate is $28/hr. If Agency B quotes a 60% mark-up, the bill rate is $32/hr. Other service elements equal, a purchaser selecting Supplier A will save $4/hr. or 14%. Additionally, the mark-up over pay rate model is an internal pricing practice commonplace in the staffing industry so that the disclosures requested are not difficult to provide. The mark-up over pay rate pricing model is, however, not without resistance primarily because it fosters the mistaken belief that all agencies provide the same levels of service or will deliver the same quality of employee. Mark-up over pay rate pricing models tend to work against agencies with a strong quality focus, who simply stated, need a larger margin between pay and bill rates to afford the level of services delivered. These models also don't take into consideration statutory differences in DIRECT COSTS that vary based on employee category or local mandates. This pricing model also creates special challenges whenever marketplace competition drives down mark-ups, while the regulatory environment is driving up statutory mandated DIRECT COSTS. Employers simply expect their staffing agencies to eat these increases, which isn't always possible. In those scenarios, quality focused agencies will tend to leave the market, leaving only a sub performing supplier base for employers to choose between. We've seen situations where purchasers were requiring mark ups at rates below statutory mandated DIRECT COSTS, which basically sets up a scenario where only non-compliant vendors can afford to deliver service. In this context, we are watching closely the changes in the staffing marketplace that will kick in later this year in preparation for the 2015 employer mandate of the ACA which will require all staffing companies to provide ACA compliant healthcare insurance to eligible temporary and contract workers. This particular across the board increase in DIRECT COSTS will be at a level impossible for most staffing agencies to absorb. We predict unwelcomed but necessary increases in staffing bill rates - particularly for high volume, lower pay rate temporary and contract workers where current margins are already tightly squeezed. The reality is that all employers face the same regulatory based cost challenges. While DIRECT COSTS will vary based on location and employee type, all agencies and their customers drink from the same employer based regulatory pool and must find a way to deal with increased costs preferably, in our view, working together. At minimum, buyers of staffing services should be wary of bill rates or mark-ups too good to be true! (NOTE: Now would be a good time for employers to ask their staffing providers how they plan to become compliant with ACA requirements. A non-compliant staffing provider can create unexpected problems for their customers down the road!) A new and innovative pricing model that addresses all these issues is a model based on DIRECT COSTs. It is the preferred pricing model of the PACE Staffing Network, reflecting our full commitment to our vision of client-agency partnerships - a vision where we work together to solve staffing challenges! The key components of a DIRECT COST PRICING model are 1) full disclosure of DIRECT COSTS, and 2) clearly identified SERVICE needs. Similar to the Mark-Up Over Pay Rate pricing model, the DIRECT COST pricing model normalizes pay rates but quotes BILL RATES based on a mark-up over DIRECT COSTS, not pay rate. The difference between DIRECT COSTS and BILL RATE are fully disclosed as our SERVICE FEES, which we negotiate with each customer based on their real needs - not prepackaged assumptions! PACE customers pay for the services they need without paying for services they don't! By of example, the following outlines the DIRECT COSTS associated with an employee earning $20/hr. and assigned to work in an administrative or professional role (impacting their workers comp insurance rate):

Employee Pay Rate/Hr. $20.00
FICA Tax $1.24
Medicare Tax $0.29
WSES (State Unemployment Tax) $0.80
FES (Federal Unemployment Tax) $0.12
Workers Compensation $0.12
Seattle Sick and Safe Set Aside $0.70
B and O Tax $0.35
Prorated Background Check Costs $0.08
TOTAL DIRECT COSTS  $23.70
(18.5% of pay rate)
Based on these DIRECT COSTS the bill rate is calculated as a mark-up over DIRECT COSTS. If, in the above example, the mark-up is set at 25%, the bill rate would be $29.63, which translates into a SERVICE FEE of $5.92/hr. or $236.80/week (assuming a 40 hour week). In the DIRECT COST PRICING model, when DIRECT COSTS change, bill rates change in fully rationalized ways. SERVICE FEES are lowered (or increased) based on service requirements. Bill rates are fully transparent with full disclosure of the fees actually pocketed by your staffing agency - taking the mystery out of your bill rate. If the upside of this pricing model is its transparency, the downside is the amount of information that is made available to purchasers who aren't always as interested in staffing math or employer costs as we are. At PACE, we see the importance of educating our clients who want to know more and simplifying our pricing conversations for those who don't. Some of our clients prefer to do their own calculations of direct costs so they can better decide if and when to hire directly; when to get work done by using a temporary or contract worker. They have the math to know which the lowest cost staffing option is. For our readers' reference, in 2014, the following represent the DIRECT COSTS faced by all Washington employers:           1. Government Mandated Costs:
  • FICA Tax (calculated as 6.2% of all employee earnings up to $117,000 annual earnings)
  • Medicare Tax (calculated as 1.45% of all employee earnings)
  • State Unemployment (WSES) Tax (calculated as a percentage - 3-5% - of the employee’s earnings up to $41,300 depending on assessed risk by job type)
  • Federal Unemployment (FES) Tax (calculated as .6% of the employee’s earnings up to $7000)
  • Workers Compensation Insurance (calculated as a rate ranging from $.10 to $2.50/hr.)
  • Local Mandated Benefits (ex. For employees working in the City of Seattle, employers are required to provide up to 9 paid days off. These costs are 3.5% of the employee’s hourly pay rate.)
  • Business and Occupation Tax (calculated as 1.5% of the pay and tax components of the bill rate)
2. Client Mandated Costs: The costs paid by your staffing agency (on your behalf) to comply with your “fit for duty” or compliance requirements - background checks, drug screens, vaccination requirements, and in some cases on pre assignment training or orientations. These costs vary from client to client depending on their "fit for duty" requirements. We believe the DIRECT COST PRICING model is the most transparent and "easy to manage" pricing model in the staffing industry. It provides the right platform to have honest direct conversations about ways to reduce your staffing agency bill rate while protecting service and employee quality.   jeanneRight behind DIRECT COSTS, the second most important component of your bill rate includes the dollars dedicated to service delivery - the work your agency performs to source, recruit, retain, refer, and manage the employee(s) they assign to your workforce. In Part II of our Pricing Primer, we will present an outline of these service offerings, plus offer tips on how to get the most out of your staffing dollar by negotiating skillfully around your service needs.     If you are interested in learning more about the staffing industry's pricing practices including the DIRECT COST PRICING model used by the PACE Staffing Network, or simply want to benchmark your current bill rates against what might be available to your company in the staffing marketplace, I’d be happy to entertain your questions or concerns in a confidential conversation. On any matter related to staffing services or agency bill rates email me at jeannek@pacestaffing.com or call our InfoDesk at 425-637-3312. This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.

The ACA and Employer Mandates. They’re Back!

by Jeanne Knutzen | May 22, 2014

0 Affordable Healthcare – ACA Smart, Staffing News Affordable Care Act, Affordable Healthcare – ACA Smart, Seattle Staffing, Seattle Staffing Agency, staffing services bellevue, staffing services tacoma, Temporary Employee

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!       

Jeanne-KnutzenThe 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 infodesk@pacestaffing.com.

This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.

What Our Clients Need to Know About the Affordable Care Act

by Jeanne Knutzen | June 28, 2013

0 Affordable Healthcare – ACA Smart, Healthcare Staffing, Staffing News Affordable Care Act, Affordable Healthcare – ACA Smart, American Staffing Association, ASA, Benefits, Healthcare, Seattle Staffing, Seattle Temporary Staffing, Temporary Staffing

What two years ago seemed like an event too far off to care about, the launch of the Affordable Care Act (ACA) this coming January 1st is now just around the corner. While there are still significant gaps in the clarity needed to fully comply with the 2700+ page law,  we now know that most of the regulations that are going to be activated in January have been written. It’s now time for employers to make decisions about how they will comply with the key provisions of the Affordable Care Act. Because we are still hearing our client’s asking questions about the basic components of the law, we wanted to share information provided to us by our national trade association, the ASA (American Staffing Association), which we think does a good job of outlining the key elements of the ACA and what it means to our clients. Since the staffing industry is significantly impacted by ACA mandates, our industry worked closely with the DHSS throughout the writing of the ACA regs. Key ACA Definitions 1. (Eligible) Full Time Employee: Any employee who averages at least 30 hours per week (130 hours per month; 1560 hours per year). 2. Seasonal Employees: Employees working less than 120 days in a year. Generally excluded from ACA coverage because not considered full time. 3. Healthcare Plan—Minimum Essential Coverage (MEC): References the requirement that a compliant healthcare plan after January 1st must cover healthcare basics, “the diagnosis, cure, mitigation, treatment or prevention of disease.” Many of the so called “mini med”, wellness, and preventative plans will not meet the MEC requirement. 4. Healthcare Plan—Minimum Value: References the requirement that a compliant healthcare plan cover at least 60% of the overall costs associated with 1) physician and mid-level practitioner services, 2) hospital and emergency care, 3) pharmacy costs, and 4) laboratory/ imaging services. Many high deductible plans will not meet Minimum Value requirements.

  • The IRS and DHSS are developing a Minimum Value Calculator and a safe harbor checklist that employers can use to see if their plan meets the Minimum Value test.
6. Affordability: Refers to the ACA requirement that the employee’s share of the costs associated with single-only plan can be no more than 9.5% of the employee’s income. 7. Play: Refers to the decision an employer might make to offer a healthcare plan that provides Minimum Essential Coverage to 95% of its full time employees and their dependent children under age 26 (NOTE: It is not mandated that spouses be offered the plan). Even employers who “play” may be subject to penalties if 1) their plan is not affordable, 2) they fail to offer the mandated coverage to at least 95% of their eligible employees, or 3) if they do not offer coverage that meets the Minimum Value test. 8. Pay: Refers to the decision an employer might make to not offer the Minimum Essential Coverage, making them subject to “failure to offer” penalties. 9. Administrative Period: Refers to the first 90 days of a new hire’s employment within which their employer is required to offer an eligible full time employee the mandated benefits. 10. Exchanges: The mechanism through which insurers will offer small employers (less than 100 employees) and individuals the ability to purchase health insurance. If a state doesn’t provide an exchange, the federal government is required to do so—Washington, Oregon and California have created exchanges. 11. Subsidies: The credits available to individuals who qualify for assistance in order to purchase coverage through an Exchange. The subsidy assists the individual but is provided directly to carriers Key ACA Requirements 1. Employer Requirements: Employers with 50 or more full time employees (and full time equivalents) must offer a healthcare insurance plan that provides minimum essential coverage (MEC) to 95% of their full time employees and their dependent children (the play option) or be subject to penalties (the pay option). 2. Employer Penalties:  Employers are subject to penalties whether they pay or play. The amount of the penalties varies: 3. Penalties for Employers who Play—“Inadequate Plan” Penalties:  If the plan offered is “unaffordable” or does not provide “minimum value” the penalty is $250/month (up to $3K annually) per impacted employee who seeks and is granted a government subsidy. 4. Penalties for Employers who Pay—“Failure to Offer” Penalties:  If the employer does not offer a MEC plan to 95% of their full time employees and their dependent children, the monthly tax is $167 (up to $2k annually) on ALL full time employees (minus their first 30). NOTE: Pay Penalties apply to all employees, not just the employees not covered and are not tax deductible. 5. Individual Requirements: Individuals must enroll in a healthcare plan that provides them and their dependents minimum essential coverage or pay penalties. If they do not obtain insurance through their employer or Medicaid, they are required to purchase an individual plan that will be offered to them through Exchanges. 6. Individual Penalties: The penalty for failing to have insurance is either a flat dollar amount per person or a percentage of household income.
  • 2014: $95 per person (up to 3 or $285) or 1% of household taxable income
  • 2015: $325 per person (up to 3 or $975) or 2% of household taxable income
  • 2016: $695 per person (up to 3 $2085) or 2.5% of household taxable income
  • 2017 and beyond – same as 2016 with Cost of Living increases
7. Individual’s Eligibility for Subsidies:  Individuals with household incomes determined to be 100-400% of federal poverty levels may be eligible for government funded subsidies that they can use to buy insurance through public health exchanges.  NOTE:  Employees are not eligible for coverage if they are on Medicaid or have been offered a healthcare plan that is both affordable and meets Minimum Essential Coverage by their employer and refused it. 8. State and Federal Public Health Insurance Exchanges
  • Provide a place for individuals or small employers to purchase of compliant healthcare insurance. Available plans will be categorized into one of four groupings: Bronze, Silver, Gold and Platinum, plus a catastrophic plan.
  • Determine an employer’s or individual’s eligibility to purchase through the Exchange.
  • Determine the affordability of a plan offered to an individual through their employer.
  • Determine an individual’s eligibility for exemptions or subsidies.
9. New Discrimination Mandates
  • The regulations relating to the new discrimination provisions embedded in the ACA are not yet written and likely won’t be before 2015.
  • 2014 will allow differentiation in the plans offered to different employees and will allow different levels of employer contributions to those plans. Tiered/pay up plans are allowable in 2014.
  • Discriminations in favor of lower paid employees will remain permissible after 2014. Any employer can pay more for their lower paid employees to ensure what they offer meets “affordability” standards.
The ACA and Staffing - Unique Applications  1. Variable Hour Employees: Refers to employees working in a job where the length of employment or the hours of work each week is uncertain. The Variable Hour employee definition is assumed to apply to the majority of temporary or contract workers represented by the staffing industry who work on 1) an undetermined number of “short term” assignments, 2)  with a variety of clients, and 3) likely to be gaps between assignments.
  • Estimates are that only 10% of the current temporary and contract workforce will be benefit eligible.
  • The ASA is advising its members that assignments targeted to last less than six months will not be challenged if classified as “variable.” Assignments intended to last longer than six months are subject to “common sense” interpretations of the requirement of “uncertainty.”
2. Specific Rules for Variable Hour Employees:
  • Measurement Periods and the Look Back Rule: A look back/measurement period is a time period (ranging from 3 to 12 months as selected by the employer) during which a variable hour employee is determined to meet the test of full time status. To become eligible for coverage, an employee must average at least 30 hours per week during the measurement period.
3. Stability Periods. Stability periods must include the same number of months as the elected measurement period but are counted on a go-forward point from date of benefit eligibility. Employees working full time during the look back period will be benefit eligible during the go-forward stability period as long as they stay employed. NOTE: Employee must be covered during their stability period even if their hours of work are reduced to part-time status. 4. Staffing Firm Costs to Play include:
  • The cost of an affordable plan for 95% of eligible employees.
  • Minus the costs that would otherwise be associated with employees who opt out because they have coverage elsewhere
  • Plus the cost of penalties for any employees that receives subsidies because the plan offered is not affordable.
5. Staffing Firm Costs to Pay include:
  • A nondeductible monthly tax assessment of $166.67/month on all eligible employees (over the first 30). Penalties would be applied to ALL employees, covered or not.
6. Impact of Increased Costs on Clients
  • Expect 1-5% increase in bill rate
7. The Staffing Industry Challenge – “There are not a lot of Health Plans Designed for Temporary Workers“
  • Mini med plans no longer allowed. Fixed dollar indemnity plans—do not qualify as providing “minimum value;” preventive and wellness plans—won’t provide “Minimal Essential Coverage.”
  • New plans are expected to be developed between now and January 1st but with unknown costs and coverage.
The American Staffing Association and the ACA The American Staffing Association played an active role in writing ACA regulations. The ASA supports compliance with the law and urges its members not to participate in practices that violate either the substantive components of the law or its intent. The ASA strongly urges its members to avoid any arrangements with clients aimed at avoiding coverage or penalties. Activities the ASA believes will trigger an IRS audit include: 1) splitting hours of work between two entities when the employee is doing one job, 2) reducing employee headcounts below 50 for the purpose of avoiding ACA requirements, and 3) terminating, refusing to reassign, or limiting the hours of work for employees if the purpose is to deny coverage or penalties. Staffing can continue to be used for valid business reasons; fluctuating workloads, staffing special projects, managing turnover, auditioning processes, and legitimate part time work. For more information on the ACA and how it will impact your temporary workforce in 2014, contact us at infodesk@pacestaffing.com.

The Affordable Care Act and Your Flexible Workforce

by Jeanne Knutzen | May 15, 2013

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While we have always known that the Patient Protection and Affordable Care Act (aka: PPACA, ACA, AHA, Obamacare) would impact the temporary staffing industry and its customers, the regulatory information that has been surfacing over the last several months is starting to reveal the impact of some of the details embedded in the law. We are finding both good and bad news in the newly published regulations—new requirements that will increase the costs of temporary and contract workers; nuances in those requirements that will make flexible workforce strategies an even more attractive model for driving down operating costs. While the law is still very confusing, the reality is that most of the regulations that will be written, have been written to the point where more and more cost conscious employers are starting to re-think how they get work done—what types of employees to put to work when, where,  and how. The following information is being provided to PACE customers as a way to lay out the facts of the ACA and its regs, prepare you for what lies ahead, and offer some ideas for not only staying compliant, but mitigating some of the cost increases we are all anticipating. Our comments will focus primarily on the impact of the ACA on our client's non-W2 workforce, which includes not only your temporary and contract workers but any workers performing work on your behalf through the services of a third party employer. ACA Overview Under the ACA, all “large” employers are required to do three things to stay in compliance with the law as of January 1st, 2014.

  1. Offer “minimum acceptable” healthcare insurance to 95% of their eligible fulltime employees (leaving a 5% margin of error).
  2. Ensure that the cost of the plan they offer is “affordable” (i.e. will not require any employee to pay more than 9.5% of their annual pay towards the costs of an individual plan), and
  3. Ensure that the plans(s) offered and the employer’s contribution to these plans is not set up to favorably treat highly compensated employees.
Large employers will be required to pay the costs for meeting these three requirements (what is often called the “play” option) or face substantial penalties for non-compliance (what is often called the “pay” option). The definition of a “large” employer applies to any employer with fifty or more fulltime employees. A fulltime employee is someone working 30 hours a week or 1560 hours per year. The Bad News for Staffing Companies and Their Customers Some clients have asked “does PACE have to be compliant with the law?” The answer is a resounding yes. And for PACE, like most staffing providers, our bad news is that the types of healthcare benefit packages typically available to the staffing industry will no longer meet the new federal standards for “minimum essential coverage.” Most staffing companies are making decisions now to either “play” (pay the additional costs associated with compliant coverage), or “pay” (pay the penalties for non-compliance, i.e. $2000/year per uncovered employee). Both options mean that as of January 1st, 2014, the direct costs associated with using third party staffing services will increase. We are anticipating that the costs to become fully compliant with the law will require most staffing companies to ask for a 2-4% increase in client bill rates, just to break even; anywhere from $.16 to $.35 cents per hour. Cost increases for all types of staffing - core and non-core—represent the bad news that is part of the ACA and will impact all "large" employers on or about January 1, 2014. Some Good News for Users of Staffing Services—the Variable Worker and Look Backs! All of the news embedded in the ACA is not bad! While an employer’s requirement to provide coverage applies to all full-time employees (individuals who work 30 hours a week, 1560 hours a year), there are special rules that apply specifically to the types of “variable” workers who work for temporary and contract staffing companies. We believe these rules will create new opportunities for cost savings for PACE customers. As the ACA regulations have rolled out, we now know an employer can stay in compliance with the law and still delay offering the mandated benefit packages to some employees who can be legitimately classified as a "variable" worker. A variable worker is someone working in a job that is subject to change, or with an uncertain duration or end date—a condition that is pretty much a given in most temporary or contract staffing environments. The period of time between when the variable worker starts work and the date when they are evaluated for benefit eligibility is called the “look back period” , and can be 3, 6, or 12 months—each employer gets to decide. Staffing companies who go through the administrative process to confirm their workers are  “variable"  and therefore subject to the “look back” provisions in the law, will be able to generate significant cost savings for their customers. While most of our client’s W2 employees will not qualify for variable worker status, and must, therefore, be offered the mandated benefits within an administrative period that cannot exceed three months, most temporary or contract workers will be considered  "variable" and not eligible for insurance coverage until they have reached the required 1560 hours (9 months or more). This variable worker “look back” provision in the ACA creates considerable opportunity for companies like PACE to offer our clients “variable” workers at significantly less cost than would be required for the client to hire an employee directly. The differentials in the direct costs of these two types of employees will be dramatic—creating compelling reasons to rethink their use of third party employers in the early stages of a new hire. The Impact of New Anti-Discriminatory Regulations on Our Clients Benefit Costs One of the more significant impacts of the ACA, not often discussed, are provisions in the law that tighten up opportunities to treat different types of employees differently.  Consultants to our industry are advising us that the anti-discrimination components of the ACA will obsolete any plan that differentiates coverage or costs in favor of highly compensated employees. For the staffing industry, this means that whatever benefit programs offered to our temporary employees needs to be offered to our regular employees. For our customers this means that whatever healthcare benefit package offered to their highest paid employees must be offered to their lowest paid employees. To be compliant with the “affordability provision” of the ACA, no benefit eligible employee in your workforce can be asked to pay more than 9.5% of their gross pay for the cost of your plan’s individual coverage. For a worker earning 20K in a year, this means they cannot contribute more than $1900 a year or $158.33/month in order for the plan offered by their employer to be compliant. How this compliance benchmark is achieved is what will get tricky for many employers. When the compliance calculations are based on what the employer can legally pay for the lowest paid employees, it limits the amount of employer contribution that can be applied to the highest paid employees. If the amount contributed to all employees is based on the amounts of the employer contribution made available to higher paid employees, overall costs of benefit coverage will skyrocket. This is the dilemma the law intends. Employers will be challenged to create benefit programs that will be equally appealing and affordable for all employees. We are already talking to some employers who will elect to outsource their W2 relationships simply to avoid the risks of discrimination. Employer of Record Services—Minimizing the Impact of the ACA! The following are some ideas for PACE customers who are open to looking at new staffing strategies built around the special provisions in the law designed specifically for staffing providers. You will notice that we have laid out these ideas from the perspective of a third party employer service provider, not just a temporary or contract labor provider. The PACE Staffing Network has recently added a new “employer only” service, what we call an Employer of Record Service, partly in anticipation of the service needs of our clients following the implementation of the ACA in January. Employer of Record Services are particularly attractive to employers with strong internal recruiting capabilities because they offer highly discounted bill rates that carve out all extra costs (for recruiting, screening, etc.) to include only those costs associated with providing W2 employer services. Employer of Record Service packages are customized to the unique needs of each client, but the following represents a few ideas of how these services might be applied to your workplace as a way to shave workforce costs.

1. Employers can use a third party employer solution to avoid compliance requirements. For employers who need to add staff, but also want to remain below the 50 FTE (fulltime equivalent) threshold that exempts them from the ACA regulations, using a third party employer solution to channel employees to another employer can delay the point when they must become compliant with the law.

The Employer of Record Service option is ideal for employers who have located an employee they want to hire, but don’t want to absorb the costs or administrative hassles of employing that worker directly. Employer of Record Services is especially ideal for companies who want to either avoid or delay the compliance requirements of the ACA.

We are encouraging our smaller clients to plan now for what lies ahead. We’ve heard stories of regulatory agencies getting ready to target companies who have been sending large numbers of already existing employees to a third party employer as a way to avoid ACA regulation. We do not recommend this strategy. 

But for employers who haven’t yet reached that 50 FTE benchmark, a third party employer solution applied to your near term hires can successfully delay when your company falls under the ACA.

Word of caution: using a third party employer solution is considered a short term (one-two year) solution. The administrative rules of the ACA dictate that after one year, all workers in your facility, regardless of who employs them, will be counted as part of your FTE.

2. Employers Can Use a Third Party Employer Solution to Mitigate the Costs of Adding Staff.  If you’re an employer who needs to hire but is reeling from the high costs currently associated with each new hire (and targeted to increase after January 2014),  it may be time to seriously consider using a third party employer solution as an extended (6-12 month) onboarding strategy.

While you may have already reviewed and walked away from the more traditional temp-to-hire staffing models, the lower cost, Employer of Record Service model offers all the cost savings advantages of categorizing employees as variable, while providing a very behind-the-scenes model of W2 employment.

Whether you use the full service temp-to-hire service model, or the considerably streamlined Employer of Record Service model, the opportunity to onboard a large number of workers at substantially lowered worker costs compared to the costs of hiring directly is the outcome of either choice.

3. Employers Can Use a Third Party Employer Solution to Avoid Administrative Hassles. The ACA is not just a regulation that adds additional direct costs, but is a regulation rich in administrative detail and reporting requirements.  Administering healthcare benefits where you have to apply definitions of variable workers, calculate look back, measurement and stability periods, and do e “affordability” testing, is going to be a daunting task for whoever takes it on.

And the penalties for not doing the right administration correctly will be significant.

As a staffing company with a large “third party employer” workforce, one of our core competencies is our ability to manage all federal and state staffing regulations, including the ACA. We are getting ready now to be fully compliant with all regulations by January 1st, 2014 and will be ready to help our customers manage through the transition.

jeanneFor a better understanding of how the ACA will impact your company and what you need to know about the options available for you to mitigate the costs associated with the new mandates, contact infodesk@pacestaffing.com to arrange for a personal consultation. Our approach to the ACA is not only to be fully compliant by January 1st, 2014, but to help our customers take full advantage of all aspects of ACA provisions that can drive down staffing costs. This article was prepared by Jeanne Knutzen, Founder and CEO of the PACE Staffing Network using information from a variety of legal, staffing, and other professional sources.