Affordable Care Act Resources
In addition to our ACA Concierge Services, we have provided an Affordable Care Act resources page to keep you informed with necessary requirements and regulations. Below is a list of trusted resources to help you navigate the Affordable Care Act.
Employer Administration Guide
- How controlled group rules under ACA impact smaller employersUnder regulations recently proposed by the IRS, employers with less than 50 full-time-equivalent employees (FTEs) that are part of a “controlled group” may also be subject to the “pay or play” penalties under the Affordable Care Act, since the entire “controlled group” is considered a single employer for purposes of determining whether the 50-employee threshold is met. The “shared responsibility” requirements would then apply to each individual employer in the controlled group, regardless of whether or not a particular employer within the controlled group has 50 FTEs. Note that for 2015 only, the FTE threshold is temporarily raised to 100.
Under §414(c) of the Internal Revenue Code, a controlled group exists when any two or more entities are connected through ownership in a parent-subsidiary controlled group, a brother-sister controlled group, or a combination of the two. Any type of business entity can be a member of a controlled group for benefit plan purposes (i.e. a corporation, partnership, sole proprietorship or limited liability company). In general, there are three types of controlled groups: parent-subsidiary, brother-sister, and combined controlled groups.
In these cases, an employer is treated as offering coverage to all full-time employees if it covers all but 5% of its employees, or five full-time employees, whichever is greater. Because of this five-employee minimum, a very small employer that is part of a larger controlled group may be required to provide coverage to all of its full-time employees, and penalties for non-compliance could be substantial depending on the size of the group. For this reason, it’s important that controlled groups and their subsidiaries understand their status as a group as well as assess their obligations with respect to ACA compliance, both from a tracking/reporting and a “shared responsibility” standpoint.
Exploring Controlled Group Types
The “parent-subsidiary” controlled group exists when one or more chains of corporations are connected through stock ownership with a common parent corporation, with 80 percent of the stock of each corporation (except the common parent) being jointly owned by one or more corporations in the group, and the parent corporation must own 80 percent of at least one other corporation.
A “brother-sister” controlled group consists of two or more corporations, in which five or fewer common owners (a common owner must be an individual, trust, or estate) jointly own directly or indirectly a “controlling interest” of all corporations in the group, as well as have “effective control” of said corporations. Controlling interest generally means jointly owning 80 percent or more of the stock of all corporations in the group (but only if said common owners individually own stock in each corporation). Effective control generally means jointly owning more than 50 percent of the stock of all corporations in the group, but only to the extent that the individual stock ownership of each common owner is identical with respect to each corporation in the controlled group).
A “combined” controlled group consists of three or more organizations where each organization is a member of either a parent-subsidiary or brother-sister group, and at least one corporation is the common parent of a parent-subsidiary and is also a member of a brother-sister group.
Companies that are part of the same controlled group generally must be combined for the purpose of determining whether they collectively employ 50 (100 for 2015) or more full-time or full-time equivalent employees under the ACA. Where the combined total of full-time or full-time equivalent employees in a controlled group is at least 50 (100 for 2015), each individual employer is subject to the employer mandate, even if that employer itself does not employ enough employees to meet the threshold.
Employers outside of the U.S.
These rules also apply regardless of whether or not the parent or owner is located in the United States. For example, a foreign-based company with several subsidiaries in the United States must aggregate the employees of the parent and all subsidiaries who work in the United States for purposes of complying with the ACA. This requirement may be problematic for foreign-owned subsidiaries operating in separate lines of business that may or may not know of the existence of the other related companies, but it is the responsibility of the individual employers to adequately assess their exposure under the ACA, and assess whether they may be subject to the “pay or play” penalties as members of a controlled group.
- Measuring Groups of Employees in Different Measuring PeriodsA question was recently posed regarding ACA reporting measurement periods and different employee groups, and we felt it would be a great topic for a blog post. The question was: “Will the law allow us to create different measurement periods by company EIN?”
The short answer is yes, you can create different measurement and stability periods for different categories of employees, including differentiation by company EIN. However, the IRS does provide specific guidance on how tracking measurement periods by different employee categories must be handled.
Different Measurement and Stability Periods for Different Categories of Employees: An employer may use measurement and stability periods that differ in either length or in their starting and ending dates for the following categories of employees:
- Collectively bargained and non-collectively bargained employees
- Each group of collectively bargained employees covered by a separate bargaining agreement
- Salaried and hourly employees
- Employees employed in different states
Each related employer in a controlled group may determine its own measurement and stability periods
- The Affordable Care Act: How Do I Calculate if I Am a Large Employer, and What Effects do Seasonal Employees have on my Calculation?The term “variable hour employees” in the Patient Protection and Affordable Care Act (commonly known as “Obamacare” or “PPACA” or “ACA”) is a source of confusion for employers working to comply with the new law. Variable-hour employees create a challenge for employers to track and identify which of these employees qualify as part-time or full-time employees. This is important, because under the ACA, employers who employed at least 50 full-time employee equivalents (FTEs) during the preceding calendar year must provide affordable health insurance coverage to at least 95% of their full-time employees.
The Definition of a Full Time Employee
The ACA defines a full-time employee as any employee who works an average of 30 or more hours a week. However, determining who is a Full-Time Employee is not always so simple as calculating the hours worked. Employers may also identify Full-Time Employees by crediting an employee who works at least one hour a day with eight hours credit or one hour a week with 40 hours for the week. However this is done, it should be consistent for all similarly situated employees. Employers must also count any hours of paid leave, including vacation, holidays, PTO for illness, layoffs, jury duty or military leave.
How the Calculation Works
Additionally, calculating whether or not you have over 50 full time employees is not as easy as it seems. It’s not just a matter of counting who works more than 40 hours a week; instead, you have to add up all of the hours worked of your part-time employees and then divide the total hours by 120 hours per month. Next, you have to add that number to all of the full-time employees you have. You now know how many FTEs you have for the month. Next, you have to add that monthly figure with your calculations for the other 11 months of the preceding year and divide by 12. Now you have the average number of FTEs for the preceding year. If the average is less than 50, you are NOT a Large Employer. There is transition relief for making your 2014 determination; during 2013, you can use 6 consecutive calendar months instead of 12 months to make your determination.
Seasonal Employee Exceptions
There is an exception for certain employers who employ a significant number of “seasonal employees”. The definition of a “seasonal employee,” according to the Department of Labor, is:
- A worker who performs labor or services on a seasonal basis (such as agricultural workers)
- Retail workers employed exclusively during holiday periods
- Others as defined by 29 CFR 500.20(s)(1)
For employers whose workforce is only 50 or more for less than 120 days of the calendar year, and the employees in excess of 50 are seasonal employees, the employer avoids being treated as a Large Employer under the ACA.
- The Affordable Care Act: Safe Harbors for Determining Full-Time EmployeesEmployers that have 50 or more Full Time Equivalents (FTEs) must offer affordable health insurance to at least 95% of their eligible employees. In order to determine the number of FTEs you must include all Full Time and Part Time employees. It is important to understand that this calculation is only used to define the size of the employer and does not mean that you have to offer health benefits to employees that are working less than 30 hours per week.
There are special calculation rules and Safe Harbors that apply to new and ongoing employees in addition to rules around certain types of employees.
Measurement, Administration and Stability Periods Defined
First some definitions: A “measurement period” refers to the look back period that is used to calculate whether an employee is full-time or not. An “initial measurement period” refers to new employees, and the “standard measurement period” refers to ongoing ones. Immediately after the measurement period comes the “administrative period,” which is when the employer determines coverage eligibility using the measurement period data, and conducts enrollment. Then there is the “stability period,” which is generally going to be the same as the plan year, but refers to the period of time after the administrative period that the employee is either eligible or not eligible for the employer’s plan.
- Learning about Five ACA Periods: Waiting, Initial Measurement, Standard Measurement, Stability, and AdministrativeIn our previous guide postings we discussed the need to measure the amount of hours worked by part time employees; in this post, we’ll talk more about how to go about doing the measurement. While most companies have already decided how they’d like to measure, we know there are plenty of you who still are finalizing your decisions.
The waiting period is the maximum amount of time that an employer can wait to offer NEW benefits eligible employees health benefits. According to the ACA employers can wait no longer than 90 days to offer affordable health benefits to new full-time employees.
Measurement periods are categorized two ways: look back (for existing employees) and initial (for new employees). For new employees, employers choose a period between three and twelve months to measure whether an employee qualifies as part time or full time.
The look back method is for existing employees to more realistically determine their status by looking back at a standard measurement period (again, selected by the employer and between 3 and 12 months) and reviewing the employee’s number of hours worked each week.
Once the standard measurement period is completed, the results will then apply for a defined stability period that should equal your standard measurement period, but can be no shorter than six months.
To keep the measurement and stability periods from stretching too long, an employee determined to be full time must remain in that category for the length of a standard measurement period (again, no shorter than six months). If an employee is determined to be part time, then employers can continue to consider them part time for the entire length of the stability period but no longer than the standard measurement period.
The initial measurement period is for new employees to start tracking their hours and determine a status within a reasonable amount of time. After employment begins, it can last between 3 and 12 months, as determined by the employer. Once the initial measurement period is completed, the results will then apply for a defined stability period. This helps make sure the determined status remains for a period of time, which is at least six consecutive calendar months but no shorter than the standard measurement period. Most stability periods will align with plan years to assist with administering benefits.
In between the measurement and stability periods can be an administrative period, which is time that should be used to notify and make changes. This can last up to 90 days and likely will encompass a traditional open enrollment period.
For example, a company chooses a 12 month stability period to match their benefits year: January 1 to December 31. Then, they choose a 12 month measurement period that runs from October 15 through the following October 14th. They opt for an administrative period that runs from October 15 to December 31.
An employee who has worked for the employer for several years will have their hours reviewed for an entire measurement period. If the average hours worked each week during the October 15-October 14 period is more than 30 hours, then the employer will have until January 1 to offer benefits.
As described above, the employer can opt for an initial measurement period to handle new hires that is between three and twelve months. If, after this initial measurement period, the employee is determined to be full time, they must be offered benefits for a timeframe equal to the stability period for ongoing employees. There can be an administrative period in between to allow for notification and sign up.
For example, the company described above chooses a 3 month initial measurement period. A newly-hired employee completes a 90 day waiting period and for the first 3 months averages 31 hours per week. The employer must offer benefits that begins after the 2.5 month administrative period ends and continue offering it to the employee until a year has passed. Another employee completes a 90 day waiting period and for the first 3 months averages 29 hours per week. After the 2.5 month administrative period ends, the employer is not required to offer the employee benefits during the following year; however, the employee is already in the standard measurement period for the following year so the employer needs to continue measuring whether the employee is trending to full time or part time.
If the second employee had worked 31 hours per week during the initial measurement period, the employer would be required to treat the employee as full time for the standard measurement period. This means the new hire would be considered full time for a year.
TIN Validation Errors & Solicitations
Click here for TIN Validation Errors & Solicitations
Draft IRS Forms
United States Department of Labor (DOL)
Patient Protection and Affordable Care Act (PPACA)
Frequently Asked Questions
U.S. Department of Health & Human Services (HHS)
Internal Revenue Service (IRS)
Affordable Care Act Tax Provisions
Information Center for Applicable Large Employers (ALEs)