5 Questions Employers Must Answer Each Month to Avoid PPACA Fines

By hrs-admin / September 16, 2014 / Uncategorized No Comments

With the full implementation of the Patient Protection and Affordable Care Act — also known as PPACA, ACA and Obamacare — looming for many employers in early 2015, many organizations are starting to get nervous. They may be wondering what might happen if they’re not compliant, or if they’re audited or fined. And they have good reason to be thinking that way, says Michael Bertaut, healthcare economist and exchange coordinator at Blue Cross Blue Shield of Louisiana.

In a presentation delivered at a monthly Baton Rouge Area Chamber luncheon on Sept. 9, Bertaut outlined five questions employers must ask each month to avoid PPACA penalties.

1. How many full-time employees do I have?

This seems deceptively simple, but it’s not. Your organization can no longer set its own guidelines about what constitutes a full-time employee for PPACA-compliance purposes. “Per federal regulation, a full-time employee is anyone who works 30 hours per week, 130 hours per month, or 1,560 hours in a year,” said Bertaut.

He also stressed the need to be sure your organization is correctly classifying people as employees or contractors when making these calculations.

2. Am I an Applicable Large Employer (ALE) or not?

Beyond calculating your full-time staff members, you must also count part-time labor for ALE calculations, said Bertaut. To do this:

Add up all hours worked by part-time staff. Divide that total by 120 (four weeks of 30 hours). And add the result, which is called “full-time equivalencies,” to your monthly total of full-time employees from question one.

Bertaut stressed that even though the monthly requirement for an actual full-time employee is 130 hours, the monthly total for a full-time equivalency under PPACA, is only 120.

Each month, you’ll use any six continuous months of data from the previous 12 to determine your number of full-time employees or equivalencies. You may choose the six-month period that favors you most, if your average is close to breaking a threshold, but the months must be continuous, he said.

If your organization has a six-month average of more than 49.99 full-time employees, you’re an ALE.

3. My average full time employees was less than 50. Now what?

“Dance,” said Bertaut, because you’re off the hook. Your organization doesn’t have to offer PPACA-compliant insurance to your employees.

However, Bertaut stressed that if one of your employees goes to HealthCare.gov and obtains coverage that includes a government subsidy, you will probably be audited in 2016. If so, you can avoid problems by tracking your full-time employees and full-time equivalencies every month to prove that your organization does not qualify as an ALE.

4. My average of full time employees was equal to or greater than 50. Now what?

Your organization is officially an ALE. The next question is whether you have more than 100 employees or not. If you have between 50 and 99.99 full-time employees (calculated to two decimal points per federal regulations based on your monthly average), then you don’t have to implement the full PPACA requirements until 2016, provided you keep offering the same coverage you did as of Feb. 9, 2014, keep paying at least 95 percent of premiums you paid in February 2014 and you didn’t reach the below-100 threshold via recent layoffs, Bertaut said.

You absolutely cannot layoff staff to reach this total. “There has to be a legitimate business reason for every layoff,” Bertaut said.

If your organization has more than 99.99 full-time employees, you need to comply starting in 2015 — unless your regular renewal date is slightly later. However, Bertaut warned: “You cannot change your renewal dates now to comply later.”

5. How do I prepare for the new audit environment in 2016 and beyond?

Bertaut has had discussions with IRS officials and asked exactly what employers can expect in terms of auditing in 2016, after the first full year of mandatory PPACA coverage. The bottom line is this: There will be audits and plenty of them.

Between data from HealthCare.gov, tax filings and W2s, the IRS will have a lot more data available to cross-reference. Every employer with a full-time employee who receives a subsidy for coverage through HealthCare.gov will be asked to prove why that full-time employee was eligible for those funds. “They won’t go after the employee until they give the business an opportunity to respond first,” Bertaut said.

If you receive one of these letters, your recordkeeping prowess will save you. If you’ve been calculating your full-time employees and equivalencies each month then, if applicable, you can prove you’re not an ALE, Bertaut said.

It may also be that this particular employee was part-time on the dates in question or that your company did offer insurance and the employee waived coverage. Bertaut says that having signed waivers of coverage can save your business between $3,000 and $4,000 in fines, per instance. If you haven’t collected waivers in the past, be sure to do so from now on.

If you have more questions about PPACA compliance in 2015 and beyond, please contact us. Our team is happy to share its expertise.

HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.

 

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