Employer Reporting 101: The Basics

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This blogpost is a supplement to our free webinar on employee tracking.

The Affordable Care Act (ACA) imposes a penalty on applicable large employers (ALEs) that do not offer health insurance coverage to substantially all full-time employees and dependents. Penalties may also be imposed if coverage is offered, but is unaffordable or does not provide minimum value. The ACA’s employer penalty rules are often referred to as “employer shared responsibility” or “pay or play” rules.
The employer penalty provisions were set to take effect on Jan. 1, 2014. However, in July 2013, the Treasury delayed the employer penalties and related reporting requirements for one year, until 2015. Therefore, no penalties applied for 2014. On Feb. 12, 2014, the IRS published final regulations on the employer shared responsibility rules.

Under the final regulations:

  • ALEs that have fewer than 100 full-time employees (including full-time equivalents, or FTEs) generally will have an additional year, until 2016, to comply with the pay or play rules.
  • ALEs with 100 or more full-time (and FTE) employees must comply with the pay or play rules starting in 2015.

To prepare for compliance in 2016, employers that intend to use the look-back measurement method for determining full-time status for 2016 will need to begin tracking their employees’ hours of service in 2015 to have corresponding stability periods for 2016.

 

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IDENTIFYING FULL-TIME EMPLOYEES

A full-time employee is an employee who was employed on average at least 30 hours of service per week. The final rules treat 130 hours of service in a calendar month as the monthly equivalent of 30 hours of service per week.
The final regulations provide two methods for determining full-time employee status—the monthly measurement method and the look-back measurement method. These methods provide minimum standards for identifying employees as full-time employees. Employers may decide to treat additional employees as eligible for coverage, or otherwise offer coverage more expansively than would be required to avoid a pay or play penalty.

Monthly Measurement Method

The monthly measurement method involves a month-to-month analysis where full-time employees are identified based on their hours of service for each calendar month. This method is not based on averaging hours of service over a prior measurement period. This month-to-month measuring may cause practical difficulties for employers, particularly if there are employees with varying hours or employment schedules, and could result in employees moving in and out of employer coverage on a monthly basis.

Look-back Measurement Method

The look-back measurement method is an optional safe harbor method for determining full-time status that is intended to give employers flexible and workable options and greater predictability for determining full-time employee status. The look-back measurement method involves a measurement period for counting hours of service, a stability period when coverage may need to be provided, depending on an employee’s average hours of service during the measurement period, and an administrative period that allows time for enrollment and disenrollment.
Employers that intend to use the look-back measurement method for determining full-time status for 2016 will need to begin their measurement periods in 2015 to have corresponding stability periods for 2016.
As transition relief, the final regulations allowed employers to use shorter measurement periods for stability periods starting in 2015 under the look-back measurement method. This is because employers adopting a 12-month measurement period (and, in turn, a 12-month stability period) faced time constraints in doing so. However, a transition measurement period is not available for stability periods starting in 2016. Therefore, employers intending to use a 12-month stability period must generally use a 12-month measurement period associated with that stability period.

We will have more information on this topic all week.  If you have more specific questions, please contact us.  AUI has a variety of tools and resources to help you understand how to track your employees for ACA compliance.

2019-03-07T20:31:19-05:00
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