After much discussion, debate and delay, the Affordable Care Act (ACA) employer mandate requiring businesses with 50 to 99 full-time employees to provide health benefits or risk paying a per month penalty on their federal tax return is set to begin on January 1, 2016. Beginning January 1, 2015, employers with 100 or more FTEs will be required to provide benefits to at least 70 percent of their full-time employees and then the full 95 percent, as originally mandated, by 2016. These delays do not exempt employers from IRS 6055 and 6065 reporting, which is still required for the 2015 calendar year.
With these increased expectations, credit unions will be required to determine whether they meet the mandate criteria, based on the number of hours their employees work per week or month. So having the ability to accurately measure, track and report employee hours is essential.
Employers will be subject to the new insurance requirement if they had at least 50-full time employees – or a combination of full-time and part-time employees that equals at least 50 – during the previous calendar year. For example, an employer with 40 full-time employees (that is, employees who work on average 30 or more hours per week) and 20 employees working 15 hours per week on average, has the equivalent of 50-full-time employees.
For credit unions that rely on a time clock and manual recordkeeping, it could be difficult to keep an exact accounting of employees and their average hours worked going forward. And the penalties for not accurately reporting employee status could be expensive.
Measuring employee eligibility for employer-provided healthcare benefits
If your credit union has employees who work consistent full-time schedules, determining eligibility status is a fairly straight-forward task. However, institutions with full-time and part-time staff members in multiple locations or with varied schedules may have a more difficult time determining every employee’s status. To simplify this process, the ACA provides measurement systems to help businesses capture employee hours over certain periods to determine which ones qualify as full-time in advance of an insurance coverage timeframe. These “look-back” periods – which can range from three to 12 consecutive months – must be implemented by the time the employer mandate takes effect.
Once you have determined that an employee had at least 30 hours of service per week or 130 hours per month during the defined standard measurement period, he or she should be considered eligible for health care coverage. In certain circumstances, institutions may need to consider several factors when determining which standard measurement period to use. For instance, institutions with a high turnover rate may want to use a 12-month period to avoid spending time to calculate hours of service, administering health care coverage and processing COBRA documentation for any employees who may not be part of the staff later in the year.
Professional advice can save time and help to avoid penalties
A professional HR consultant can take a look at your current system and provide the tools and resources you need to streamline your time-tracking process and recording system to alleviate costly errors that can occur when you maintain these important records manually. Professional advice and a Human Resources Information System (HRIS) can also assist with the following:
- capturing full-time/part-time counts for all employees, which can be broken into specific organizational levels – such as locations, departments or cost centers;
- determining which time measurement strategy is appropriate for the institution;
- providing alerts when employees are nearing 30 hours a week or 130 hours a month;
- maintaining proper information for IRS 6055 and 6065 reporting related to the ACA requirements; and
- managing benefit administration when employees become eligible for healthcare coverage.
With the onset of the ACA’s new initiatives, employers will be required annually to average the number of workers employed during the year to determine whether they meet the ACA mandate criteria. So integrating employee information into one module now will reduce the time it takes to track, monitor and report the information necessary to maintain compliance with the ACA for the long-term. Plus, it reduces the possibility of errors that can lead to costly fines.
And while HRIS systems were once used primarily by large institutions, with new requirements for tracking and reporting employee time, even small institutions can benefit from user-friendly web-based applications to maintain robust time-tracking capabilities. By outsourcing this service, credit unions can escape the costs of implementing internal hardware and software systems, and avoid adding IT personnel to manage the process. As a result, all of your employee data will be stored in one readily accessible location and you can rest assured that your institution is meeting all ACA requirements.