Is your Staffing Firm Compliant with the Affordable Care Act?
By: Reva Nelson
Staffing firms, take heed. If you have between 50 and 99 workers, the deadline for compliance with the Patient Protection and Affordable Care Act (ACA), your deadline is fast-approaching: Jan. 1, 2016.
For staffing firms with more than 100 full-time equivalents (FTEs), this is old news. Larger agencies have already had to address ACA requirements as of Jan. 1, 2015, but it’s time for those with 50-99 FTEs, which have had a longer transition relief period than larger organizations, to make sure their ducks are in a row.
Who’s the employer — the staffing firm or the client?
Staffing firms face a conundrum that most other types of companies do not, which is the question of whether it is the staffing firm or the client that is responsible for providing coverage. Unfortunately, the specifications of your staffing contracts are not relevant. Instead, the ACA relies on the IRS control test to determine which party is the employer.
How many FTEs do you have?
The ACA defines “full time” as 30 hours per week, 130 hours per month, or 1,560 hours in a year. This sounds straightforward enough, but particularly in the staffing industry, it is not always clear cut.
Temps come and go on a repeating basis, working different numbers of hours and durations. Some employees may work full-time, but only for part of the year.
“The nature of our business adds a level of complexity, because employees are hired, then separated and then rehired and the cycle repeats,” says Rebecca Cenni, CEO of Atrium Staffing. “The sporadic nature of temporary assignments makes accurate reporting challenging.”
For this reason, the IRS offers look-back provisions as an alternative to a strict monthly calculation for staffing and other types of companies that employ intermittent labor. Under the look-back provisions, companies can look back at the last 12 months of timesheets and pick a measurement period between three and 12 months to determine employees’ average weekly hours. If an employee worked an average of 30 hours per week during that time, the ACA considers that individual full time.
David Lewis, CEO of Operations Inc, an HR outsourcing and consulting firm, says there’s more to successfully navigating ACA compliance than the math of calculating FTEs and determining affordability.
Beyond the math, there are a number of practical questions you will want to consider with regard to your firm's approach to ACA compliance:
Will you need to increase your billable rates?
Inevitably, the additional cost and burden is going to be must be absorbed somewhere, whether by passing it on to clients and/or streamlining operations to cut costs. Staffing firms may need to increase their billable rate to account for the added expense of new health care benefits. This brings the challenge of communicating the news of potentially higher costs.
“It’s important to set expectations and communicate with your clients,” cautions Lewis. “Higher prices may become a deterrent to the clients who use your staffing agency,” he notes.
Will employees sign up for your plan?
Many staffing agencies that have never offered benefits before may find that fewer employees enroll than they might expect, notes Lewis. “Most temporary employees earn less than $35/hour, so even if offered,” says Lewis, “the overwhelming majority won’t take the benefit. Even if it’s ‘affordable,’ according to the ACA, it’s not necessarily affordable to workers.”
This cascades into another potential concern: pricing. If a significant number of employees choose not to enroll in your plan, your insurance carrier’s group plan pricing may change for the worse. For instance, if the insurer priced your plan for a group of 65 people, and fewer than 20 enroll, pricing is likely to suffer.
There is no IRS penalty for employers in this scenario, provided your plan is considered affordable. It’s important to note that individuals who opt for no coverage at all will be fined under the individual shared responsibility provisions.
Does your technology facilitate ACA compliance?
If your technology doesn’t support ACA compliance, it may be time to invest in software to track and manage assignments and billing that incorporates these fundamental calculations. Look for one that incorporates:
– The number of average and total accrued hours each worker has worked over a period of time (this determines who is counted as an FTE)
– Average pay rates (which are used to determine whether your plan is affordable)
– An appropriate look-back period
Knowing how to accurately count, classify, and track the eligibility of your employees, including seasonal and intermittent workers, are critical elements of determining your staffing firm’s responsibilities and liabilities under the ACA. With January 1st, 2016 looming, now is the time to check you math — before the IRS does.