Corporate Compliance With Affordable Care Act

ACA avoidance or ACA compliance? When using a staffing firm, which path does your company choose?

By now, nearly everyone has heard about the Affordable Care Act or ACA. Being in the staffing industry and interacting with hiring managers and human resources professionals on a daily basis, it is a frequent topic of discussion. We are often asked, “how do we sort this out?” We have invested quite a bit of time and effort to understand the ACA, and here is what we have learned from our advisors, industry associations, seminars and other experts.

One thing is for certain: The degree of uncertainty and confusion is extraordinary and unlikely to get much better.

We have also noticed two diverging trains of thought: Some companies are hard at work trying to figure out how they can get around the ACA; others are trying hard to understand how they can comply with the ACA. Brookwoods Group is in the latter camp.

Although there have been many exceptions made over the past two years, we’ll see more aspects of the ACA interpreted through regulation and enforced by law in the next two years. This means that grace periods to become fully compliant are running out. The last quarter of this year, 2016 -- and more importantly 2017 -- are years that will define how staffing agencies and corporations will have to work together to ensure proper, affordable healthcare coverage.

FUN FACTS

Below we’ve included some facts that help clarify how the ACA may affect the way your company retains “temporary” or “contract” labor resources going forward. This is something that everyone needs to know as the federal government has indicated that the fines they plan on levying for ACA violations will be quite severe and higher than anticipated.

Fact #1     Potential exposure exists for corporations using staffing agencies that are not offering affordable healthcare coverage. Employee benefit lawyers tell us that the government is determining that in the context of the ACA “common law employees” include temporary employees through staffing agencies.

To clarify: If you are directing the employee at all (for example, setting the hours they work, providing a workplace or outlining the duties to perform), they would fall within this category. Even if they are not on your payroll, for the purpose of the ACA it is YOUR responsibility to make sure they are in compliance with ACA and covered by your staffing partner.

Fact #2    New tax forms are coming. On last year’s 1040 form, employees had to check a box – “Did you have healthcare coverage this past tax year?” It was a simple yes or no. This year new forms will be provided by employers to each employee and required to be filed with their tax return to prove they have coverage. It will no longer be based on the honor system. (This has been the process with compensation reporting for years; a W2 is attached to the tax return. Going forward, there will be a similar form for reporting each employee’s health coverage.)

Fact #3     Full time employment is not defined by working 40 hours as it has been the past. It is now defined as 30 hours per week. So employees, consultants, or contractors working 30 hours or more will be considered “full time” for ACA purposes. Improper coverage for people working over 30 hours will trigger ACA penalties.

Fact #4    In order to qualify, healthcare policies must be “affordable” as described by the regulations in the ACA law. Beginning in 2015, the IRS increased the percentage contribution for healthcare of an employee’s household income from 9.5% to 9.56%. This means someone who is at Federal Poverty Level income of $11,700 annually will not be able to pay more than $93.18 per month for their portion of healthcare.

Fact #5     Out of Pocket Maximums (OOP) will be regulated by the government. This means that companies who were looking to mitigate costs by finding plans with large OOP will have to adjust.

Fact #6    Non-compliance penalties have increased significantly. For example, the annual cap on penalties had been $1,500,000 and is now $3,000,000. Although there are ways to reduce overall penalties, it is not really a feasible option for companies to hide their heads in the sand or simply absorb the penalties as a cost of doing business. ACA is a top priority of the Federal Government and the IRS has been directed to dig deep to find companies that are not in compliance.

BROOKWOODS GROUP IS COMPLIANT

Since Brookwoods Group was founded in 1998, we have been committed to fair employment. Brookwoods Group ensures -- as a top priority -- that our employees working for our clients have benefits that are competitive, desirable, and fairly comparable to the benefits our clients offer to their own employees. From the beginning, Brookwoods Group offered a full benefit package to our consulting field employees. These are people who work on site for our clients (major corporations) but are on the Brookwoods Group payroll as defined in Fact #1. If you are using Brookwoods Group as your staffing agency, you already are and always have been ACA compliant and didn’t even know it.

In fact, we pay 100% of our employee healthcare coverage and we offer an employee payroll deduction program to cover their family if they need to. Our group policy is not only paid for by Brookwoods Group, but it is a robust plan so the OOP (Out of Pocket) costs is better than the government requirements. Insurance premiums have increased 70% in the past 5 years, but Brookwoods Group has not altered our stand on providing fair benefits to all employees.

To have top talent comfortable working on long term contracts and staying with the project we also make sure they are paid for holidays, matching the holidays enjoyed by our client’s employees. Our consultants accrue vacation or personal time off and we even have a matching 401K program so they can continue to invest in their future. Although these employee benefits are not government requirements, they provide important benefits to our clients as well:

1. Good benefits enable us to attract the highest caliber employees as consultants. Great professionals at all levels from entry to seasoned can reasonably command decent benefits as part of their compensation package. Average or mediocre professionals are perhaps fortunate to have a job at all, but no sane client wants to fill an important role with a mediocre professional. Neither do we.
2. Good benefits reduce employee turnover. Although we cannot guarantee our employees will stay loyal through the entire project, we can with pride note that our drop off rate is minimal and we attribute much of this to the benefits we have offered both today and in the past.

Being in compliance with the ACA and offering reasonable benefits to all employees adds costs, which are of course built into our fees and passed on to our clients. But the cost of non-compliance with the ACA, of unwarranted turnover, and of unfit professionals is much, much greater.

The decision is yours. Is it important to have great talented people working on your projects that want to stay and are happy with their work situation, or are you willing to risk onerous penalties and needless turnover on your projects and work?