Is Your Payroll System Ready for the ACA?

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Beginning in 2015, the Affordable Care Act employer shared responsibility provision requires large employers (50 or more employees) to offer minimal essential coverage to full-time employees and dependents (excluding spouses) and offer coverage that is deemed affordable and of minimum value (60%) in order to avoid a penalty. The provision places a significant burden on payroll, timekeeping and employee status tracking. Find out if your systems are ready!

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Is Your Payroll System Ready for the ACA?

  1. 1. BIZGROWTH STRATEGIES Special Health Care Reform Edition Article reprinted from Winter 2014 IDEAS TO HELP GROW YOUR BUSINESS Payroll Is Your Payroll System Ready for the ACA? B eginning in 2015, the Affordable Care Act (ACA) employer shared responsibility provision requires large employers (50 or more employees) to offer minimal essential coverage to full-time employees and dependents (excluding spouses) and offer coverage that is deemed affordable and of minimum value (60%) in order to avoid a penalty. The provision places a significant burden on payroll, timekeeping and employee status tracking. Employers must prepare a new process to include employee counts, employment status and health plan cost – all of which continue to compound the payroll operations process. Employers will need a combination of information to analyze and make decisions about status as an applicable large employer, the offer of health coverage and their risk for penalty. The employer shared responsibility requires the employer to calculate the number of full-time employees (including seasonal) and full-time equivalents for each calendar month for the preceding calendar year by adding the number of total employees and dividing the sum by 12 (for fractional results, round down). The result is the average number of full-time employees. If this total count is less than 50, the employer is not subject to the employer shared provision for the current calendar year. If the total count is greater than 50, the employer is subject to the employer shared responsibility provisions for the current calendar year. A seasonal worker exception may apply if the total number of employees exceeds 50 for 120 days or less during the year. © Copyright 2014. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved. The penalties are assessed if the employer employs a credit employee. A credit employee is one who receives a premium tax credit or cost sharing assistance when purchasing coverage through the Marketplace. Calculated monthly, penalties are of two “so called” types: 1. No Coverage Penalty: If the employer does not offer minimal essential coverage to at least 95% of its full-time employees and has at least one credit employee, the penalty is $166.67 per month per full-time employee (less the first 30). 2. Inadequate or Unaffordable Penalty: If the employer offers minimal coverage that is unaffordable (i.e., employee’s premium exceeds 9.5% of household income) or coverage does not meet minimum value and the employer has at least one credit employee, the penalty is the lesser of $250 per month for each credit employee or the “No Coverage” calculation previously described. our business is growing yours Payroll, HRIS and timekeeping systems are valuable sources of information for employers to perform essential calculations in order to determine their status as an applicable large employer. However, other information will be needed to determine who must be offered coverage to avoid employer shared responsibility penalties. Oftentimes, employees are hired with variable work schedules, making it difficult to track hours. The law permits use of a tracking period (known as a measurement period) to look back to determine those employees’ status as full-time or not. Additional information will need to be included in determining variable employees’ status during the measurement period, such as unpaid leave hours. Based on hours worked during a measurement period, an individual is deemed full-time or not during a corresponding “stability period” of at least the same duration. Payroll systems also will be essential in determining plan affordability. Wages reported in Box 12, Code DD of the Form W-2 will be compared with payroll deductions for health plan premiums to aid in determining whether the employer’s health plan is affordable. Employers should review data results in the coming months to make decisions and determinations about the offering of health coverage. Many house this required information in various internal locations, including payroll, benefit and HRIS systems and spreadsheets. By utilizing multiple sources of data to achieve the desired reporting results, an employer may experience inefficient manual processes and difficulty defining employee status. Employers may opt for a centralized solution that maintains all pertinent data in one location internally or outsource the task to relieve the administration burden. Payroll operations for large employers (over 200) must also consider the delayed ACA requirement of automatic health benefit plan enrollment to include opt-out provisions. Small employers should be mindful of the evolving Small Business Health Care Tax Credit. The employer shared responsibility provision presents challenges in decision making, compliance, determining status and how to avoid potential penalties. The increased complexity and additional burdens on a payroll operation of any size employer should be a priority as final regulations are released and 2015 approaches. DAISY HERNDON CBIZ Payroll, Inc. • Roanoke, VA 540.853.8077 • dherndon@cbiz.com

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