The Staffing Industry has undoubtedly been more adversely affected by The Affordable Care Act (ACA) than most. Heightened turnover and staffing shortages within the HR department has increased exposure to ACA penalties due to lack of understanding compliance strategies and reporting requirements.
ACA penalties are assessed in arrears so by the time errors are discovered, it’s possible two additional reporting periods have passed, and penalties could be compounding. Historically, employers found relief from penalties under the Good Faith Transition Act. This was intended to act as a grace period for employers to learn how to correctly report information on their ACA filings.
Relief ended in 2020, so companies are now beginning to see how this change will affect their 2021 filings. Additionally, there have been other changes to the ACA that have made penalties more costly and will require your organization to evaluate your compliance strategies.
Who Does the ACA’s Employer Mandate Affect?
Applicable Large Employers (ALEs) with at least 50 full-time or full-time equivalent employees (FTEs) on business days during the preceding calendar year must comply with the ACA’s Employer Mandate. To determine whether companies are deemed ALE for the current year, employers must look back to the preceding tax year and count both full-time and FTEs.
- A full-time employee averages at least 30 hours of service per week. To calculate FTEs, monthly service hours for all non-full-time employees are totaled, then divided by 120. When full-time and FTE subtotals are added together and total more than 50, the employer is deemed an ALE.
- An employer’s ALE status in 2023 is determined based on the employer’s 2022 employee-count.
Example:
Employer has 70 physical employees, 40 of them work at least 130 hours a month (30 hours per week), those 40 workers are considered full-time employees. If the remaining 30 employees each work 100 hours a month totaling 3,000 hours, divided by 120 hours, is 25 FTEs. Add the 40 full time employees, to the 25 FTEs for a total of 65 FTEs for that given month. This Employer is subject to the Employer Mandate.
Certain exceptions may apply if the workforce (a) exceeds 50 full-time or full-time equivalent employees for 120 days or fewer per calendar year, and (b) the employees that cause the workforce to exceed 50 are “seasonal workers.”
Navigating the ACA’s complex regulatory landscape while ensuring coverages satisfy ACA requirements in a cost-effective manner can be a large undertaking. The MMA Staffing Practice has the knowledge and expertise to guide you. Contact us for a complimentary compliance audit and follow along as we continue our blog series on the ACA.
