Are You Ready For the Affordable Care Act?

Nov 14, 2014

ACA illustrationIn less than two months, businesses with 100 or more workers will be required to provide some sort of healthcare coverage for their employees.

This includes staffing companies who are employers of record. And it has potential consequences for those who use back office providers who serve as the W2 employer of record.

The rules of the Affordable Care Act can be complicated. For instance, the health plan must provide “minimum value” and it must be “affordable.” Even the rules for determining how many employees you have is not nearly as simple as counting up the number of paychecks you issue. The formula includes your FTEs, which are calculated by adding regular hours, holiday hours, paid time off, and overtime and dividing by 120.

Things get even more complicated when you take into account employees with breaks in service, a fairly typical situation for staffing firms, and especially for those with an IT practice where contractors take time off between projects. Do you use 13 weeks or four weeks as the cutoff for classifying a returning worker as a new employee and having them wait out an eligibility period?

As if that isn’t enough to make your head spin, what do you do if you happen to manage a firm with a health plan that begins on a fiscal year, rather than January 1? You might get extra time to comply with the requirements of the Affordable Care Act.  Then again, if you didn’t offer the plan to substantially all your full-time employees, you might still get hit with a penalty for non-compliance.

Bullhorn has a whitepaper that helps with some of the trickier issues staffing agencies face with the Affordable Care Act. Written by Sean Bradley, former SVP of tax, benefits, and risk management at Randstad, the whitepaper covers three specific areas: transition issues for agencies that have a health plan; breaks in service; and, the meaning of affordability. You can download it here.

Another resource that will give you a better understanding of the implications for staffing agencies is available from Top Echelon Contracting.

Although the January 1 deadline for providing an affordable, minimum value health plan only applies to the largest staffing firms, a year from now agencies with 50-99 W2 employees will also have to provide health coverage.

One more thing: Your client could be on the hook to provide coverage if you don’t, or the plan you provides doesn’t meet all the requirements. The government will apply the Common Law Employer test to determine whether the staffing firm or the client is to be held responsible for providing health coverage.

Even though you pay them, or the temps may be employees of your back office provider, the government may consider them common law employees of the employer where they work. There’s a bit of fuzziness about this.

By now, most employers have worked out the requirements with their staffing provider. If you have yet to negotiate with your clients over providing health coverage, you need to. Christina M. Broxterman and Laura Summers, employment lawyers with Ogletree, Deakins, Nash, Smoak & Stewart, P.C, have a Q&A discussing that issue here.

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