Most of the more than 2,000 Long Island companies with 50 to 99 employees will be required to offer affordable health care coverage to the majority of their full-time employees under the Affordable Care Act come 2016 or pay a penalty.
Most of those midsize firms got a reprieve from having to provide coverage this year, but that doesn't mean they got a reprieve from ACA reporting requirements. They need to be tracking employees' hours in 2015 to comply in 2016.
For many business owners, the complexities involved in making sure they properly classify employees have made it an onerous task.
"With limited resources and staff, we don't have the ability to keep up with this on our own," says Jeff Goldstein, CEO of LaMar Lighting in Farmingdale, a wholesale manufacturer of fluorescent and LED lighting. "I manufacture lighting fixtures, I'm not an HR expert."
Payroll, HR assistance
Goldstein isn't taking any chances and has enlisted the help of Advantage Payroll Services, a payroll and human resources firm in Freeport, which last year launched a service to help businesses determine ACA compliance by providing a monthly employee-by-employee report detailing hours worked.
There are "so many new rules and regulations" that have come out, Goldstein says.
The law is complex, and employers with 50 or more full-time (or full-time equivalent) employees must make sure they're properly identifying and classifying employees eligible for coverage.
Those businesses with fewer than 50 full-time employees aren't required to provide coverage under ACA's employer mandate, notes Dawn Davidson Drantch, in-house counsel at Alcott HR, a Farmingdale professional employer organization that's also assisting firms with ACA compliance.
But those that fall above that 50-employee threshold must provide affordable coverage to full-timers or face penalties of up to $3,000 per employee, she says (see nwsdy.li/employer).
Last year, firms with 50 to 99 employees that met certain criteria were given a reprieve until 2016 to comply, while many of their larger counterparts with 100-plus employees already had to start offering affordable coverage to the bulk of their full-timers in 2015.
In general, coverage is deemed affordable if employees' share of the premium doesn't exceed 9.5 percent of their annual household income, says Jessica Stelfox, director of HR consulting at Advantage Payroll.
To qualify as a full-timer under ACA, employees must work on average at least 30 hours per week or 130 hours per month, she notes.
It's not difficult to identify traditional full-timers, but other employees are trickier to classify, such as seasonal workers and those who work variable hours. Each designation has its own rules and guidelines.
Proactive planning urged
That's why employers of midsize firms should have already begun tracking hours worked this year to identify which employees are eligible for coverage in 2016, Stelfox says.
Plus, employers must file "information returns" with the IRS and provide statements to employees early in 2016 detailing their offers of health coverage to full-timers for calendar year 2015, notes Bill Enck, a senior manager at BerryDunn, a Portland, Maine-based CPA and consulting firm (see nwsdy.li/report).
This reporting lets the IRS know which full-time employees were offered coverage this year and whether that coverage was affordable, to determine whether the employees are eligible for any tax credits if they purchased health insurance through government health exchanges, he says.
"Being a small company, we do as much as possible in-house, but it's getting to the point where we are unable to keep up with all the compliance issues, so we are turning to someone on the outside," says Goldstein, who employs about 70, including several part-timers.
His wife and company controller, Carolyn, already has a full plate including accounts payable, HR and administering their 401(k) plan.
"We want to be proactive and avoid any potential penalties," he notes, adding they offer full-timers health insurance but want to ensure they're in compliance with reporting requirements.
Experts said more companies need to do the same.
"Unfortunately even though we notified our clients about ACA, we're not getting as big a response as we anticipated to help clients manage this," says Rob Basso, president of Advantage Payroll Services.
Tom Suozzi, strategic relationship director at Uniondale-based HB Solutions, an ACA compliance firm, concurred, noting, "Companies aren't taking it as seriously as they need to be yet."
This may be because they don't understand all its complexities, he notes.
"The ACA statute is even more rigorous than labor law standards regarding full-time employees," says Suozzi, former Nassau County executive.
It can be confusing, more so for those businesses with variable-hour employees, says Alcott HR president Lou Basso.
"It's a lot easier for the more traditional businesses where the vast majority of staff are full-time," he notes.
It gets trickier when you get into other employee categories like seasonal employees, he says.
When determining whether your company falls into the applicable large-employer status -- those employers that must offer affordable coverage or pay a penalty -- you can generally exclude seasonal employees from the full-time count if they work 120 days or fewer during a set season each year and they're the sole reason you'd be pushed over 50 employees, Drantch says.
If you're already over the 50-employee mark and you have seasonal employees who work on average six months or less, you can treat them as variable-hour employees and use a "look-back" measurement period to track hours, adds Enck of BerryDunn.
Under ACA, employers are allowed to establish a look-back period for which they can track variable-hour employees to see whether they qualify as full-time, Drantch notes.
This consists of a measurement period spanning from three to 12 months to track employee hours, she says.
Many employers are using a 12-month measurement period that coincides with their health plan, Stelfox notes.
This is generally followed by an administrative period of up to 90 days to determine those employees eligible for coverage, notify them and enroll them in a plan, she says.
Then comes a "stability period" that can span anywhere from six to 12 months but generally can't be less than the original measurement period, Enck says. This is the period of time for which their status as a full-time employee or non-full-time employee will be locked in, he notes. If they were deemed full-time during the initial measurement period, they must be provided coverage for the length of the stability period, even if their status changes, Enck says.
This would remain in effect until the next measurement period, he notes.
Record keeping is a continual process, says Rob Basso of Advantage.
"They're supposed to be doing this on a monthly basis," he says. "We think in November and December, there'll be a deluge of people that say we need to be doing this."
Keep in mind if you have part-time employees, you must also track their hours to see if they equate to full-time equivalents, he notes. This can be calculated by dividing the combined hours of all part-time employees in any given month by 120 and adding that onto your full-time employee count, Stelfox says.
The calculation can push some businesses over the 50-employee mark and into the requirement to provide coverage, but coverage is still only required for full-time workers.
"You need a good payroll system and software," adds Lou Basso of Alcott. "If you're at square one, you have a problem."