When it comes to the Affordable Care Act (ACA), one of the biggest concerns for employers in 2014 will continue to be the big ‘C’: Compliance. With so many numbers floating around – 30 hours, 50 employees, 90 days, 3-12 months, $2,000 and everything in between – it’s no wonder HR leaders are anxious about maintaining compliance with ACA regulations. 

 

 

 

 

 

Crunching the Numbers: Employee Hours and the Affordable Care Act

When it comes to the Affordable Care Act (ACA), one of the biggest concerns for employers in 2014 will continue to be the big ‘C’: Compliance. With so many numbers floating around – 30 hours, 50 employees, 90 days, 3-12 months, $2,000 and everything in between – it’s no wonder HR leaders are anxious about maintaining compliance with ACA regulations.

jim-oconnell.jpgJim O’Connell, executive consultant, Ceridian Corporation, Washington D.C., says, “Now is the time for employers to take a closer look at their human capital management topography and start re-evaluating employee health benefit strategies well before mandates take effect.”

In 2015, employers with 50 or more full-time employees are required to offer full-time workers health coverage that is both “affordable” and of “minimum value.” In this article, we look at how the right preparation and the right tools can help ensure that all of your numbers add up correctly when it comes to compliance with the ACA. And now is the time to get started.

Three key steps to crunching the numbers for ACA

CalculatorStep 1: Accurately collect and categorize service hours

The ACA specifies that full-time employee status should be based on the calculation of average service hours. Service hours are those for which an employee is paid, or is entitled to payment, for working. An effective time tracking application can help properly categorize which hours are considered service and which hours are considered non-service, thus taking the guesswork out of categorizing these hours.

Piggy BankStep 2: Identify benefits eligible employees

Once you’ve accurately collected and categorized service hours, you need to determine which employees are eligible for health benefits by calculating their full-time status. ACA defines a full-time employee as any individual employed an average of at least 30 service hours per week, or 130 service hours per calendar month.

Though employers may establish a measurement period for determining full-time status anywhere between three and 12 consecutive months, there are challenges associated with this. Specifically, employers need:

  • An application that enables them to use the most appropriate measurement period for their unique operating environment
  • To be able to seamlessly transition new hires from the initial measurement period to the measurement period for ongoing employees
  • A tool with the capabilities and data to flexibly and accurately perform these average hour calculations

Cog & WheelStep 3: Proactively manage employee average hours on the front line

One of the biggest challenges in managing the ACA is connecting all of its implications to front-line managers who schedule employees and approve time cards. Consider the following example:

A manager requires an employee to work a four-hour shift on a Saturday. The manager has two employees available to work the shift.

  • A full-time employee who earns $20 an hour and has already worked 40 hours in the week. Scheduling this employee would result in an overtime expense at time and a half, so the total cost of scheduling this employee would be $120 for this shift.
  • A part-time employee who earns $10 an hour and has only worked 29 hours during the week. Scheduling this employee would not result in any overtime, so on the surface, it would appear to the manager that the cost of scheduling this employee would be only $40 for this shift.
    Employee group

In this situation, the manager would most likely choose to schedule the part-time employee. If the manager has no visibility into the benefits implications of their decision, they would have no way of knowing that by scheduling the part-time employee for this shift, they have just pushed that employee over the 30 average hours per week threshold for the measurement period. Further, this is the last week in the measurement period, so there will be no way to reduce the employee’s average hours in future weeks – the employee has now qualified for benefits.

Assuming that the average cost to provide benefits for employees, based on the premium alone, is around $6,000, in trying to avoid a relatively small overtime expense, the manager made a very costly decision by unwittingly making this employee eligible for benefits.

Tools like Dayforce HCM connect live time and attendance data, employee schedules and benefits eligibility rules together in a single application. Real-time notifications provide managers the visibility they need to help ensure that part-time employees do not accidentally become full-time employees. premium alone, is around $6,000, in trying to avoid a relatively small overtime expense, the manager made a very costly decision by unwittingly making this employee eligible for benefits.

While there is no shortage of compliance concerns when it comes to the Affordable Care Act, tackling these three steps now will help put you on the road for compliance success.

For more information:

  • Learn about Dayforce HCM
  • Read our eBook on making compliance your priority in 2014