Counting Employees
Not as Easy as it Sounds
By
James Clay
Vice President Employee Benefit Services & HR Consulting
and
Julie Athey, J.D.
HR Consultant and Compliance Specialist
Agenda
• Introduction and Background
• Are you a large employer as defined by ACA?
– Controlled Groups overview
• Who is eligible to be offered coverage?
– Counting hours of service
– Measuring variable hour employees
• Next Steps
– Pay or Play?
– Implementation
Introduction
• Healthcare Overview and Update 1/30/2013
(recorded session)
• What the ACA requires in 2014
• New game / new rules
• Classifying and counting employees critically
important
• New definitions / new boundaries
• Your organization’s complexity?
The Miller Group
• Client by client planning process
• Current benefit plan matrix and new world:
– 30 hours
– Controlled Groups
– Variable hour employees
– Benefit offer and acceptance
• Our apologies
New Driving Rules
• Employer responsibility
– Need to self identify (don’t assume)
• We may not know
• Based on number of employees
• Different from historical benefit eligibility
structures
• Critical questions: Who, when and why?
Many Purposes
and Ways to Count
•
•
•
•
Large or small employer?
Reformed small group or large group markets
Auto enrollment at 200 employees
95% rule
Starting Timeline
•
•
•
•
•
Original 1/1/2014 start date
Now Fiscal Plan Year
2013 measurements for 2014
Capturing data for measurement
HRIS and “Demand Notice”
Large Employer Status
Counting Employees in General
• Large employer has (on average) 50+ FT
employees
– Based on average # of employees in preceding
calendar year
– Calculation to be performed in 2013 for 2014 plan
years
Large Employer Status
Counting Employees in General
• Includes FT employees and FT-equivalents
• May need to include employees of related
companies
– Controlled group analysis below
Large Employer Status
When to Count Employees
• Analysis for 2014 may be based on average #
of FT employees for as few as six months in
2013 (instead of the full year)
• For 2015 and on, analysis to be based on
average # of FT employees for full preceding
calendar year
Large Employer Status
Who Is a FT Employee?
• “Full-time” now defined as 30+ “hours of
service” per week
– Effective for 2014 plan year
– Definition applies during large employer analysis
and determining who is offered coverage
• Many employers currently require > 30 hours for
benefits eligibility
• New population of covered employees
Large Employer Status
What are Hours of Service?
• Hours actually worked
• Hours not worked but for which payment is
made or due (i.e., paid leave)
– Up to 501 hours for a single continuous period of
paid leave
Large Employer Status
Counting Hours of Service
• 130 hours per calendar month is treated as
30 hours per week (for purpose of identifying
FT employees)
– No need to determine FT status on week-to-week
basis
– This applies to large employer analysis and offers
of coverage to non-variable hour FT employees
(below)
Large Employer Status
Counting FT Employees
• Who is included in count of FT employees?
PT?
TEMPS?
SEASONAL?
No (but they are included in FTequivalent calculation)
Yes, if they work
> 130 hours in the month
Yes, if they work
> 130 hours in the month
*Don’t be deceived by seasonal employee exception*
VARIABLE HOUR?
Yes, if they work
> 130 hours in the month
INDEPENDENT
CONTRACTORS?
No, if properly classified
Large Employer Status
What is a FT-equivalent?
• FT-equivalents are the number of full-time
employees the employer would have if all PT
hours were worked by full-time employees.
– Example: Four employees who each work 20
hours per week = Two FT-equivalents.
Large Employer Status
Counting FT-equivalents
• Whose hours are included in calculation?
PT?
Yes
VARIABLE HOUR?
Yes, if they work
< 130 hours/month
Yes
(Unless counted as FT)
Yes
(Unless counted as FT)
INDEPENDENT
CONTRACTORS?
No, if properly classified
TEMPS?
SEASONAL?
Large Employer Status
Calculation of FT-equivalents
All part-time hours worked in a month
÷ 120
FT-equivalent employees
Large Employer Status
Total Employees
+
Full-time Employees
FT-Equivalent Employees
Number of Employees
Large Employer Status
What if You Have…
• 50+ Employees?
– You are an Applicable Large Employer
– Subject to ACA’s affordability and minimum
essential coverage requirements
• < 50 Employees?
– You need to consider applicability of Controlled
Groups rules
Large Employer Status
Controlled Groups
• In determining whether a company is subject
to the ACA, two or more companies that have
common ownership may be treated as a single
employer
• All employees of such companies must be
counted under ACA if the companies form a
“controlled group”
Large Employer Status
Types of Controlled Groups
• In general, there are three types of controlled
group relationships:
– Parent/Subsidiary
– Sibling Companies
– Combined Groups
Large Employer Status
Why Do Controlled Groups Matter?
• You might be a large employer when you think
you’re small
– Example: You have > 50 employees when related
companies are counted together
• You own another company you think is “small,” but
should be considered a large employer under ACA
– Example: You have > 50 employees; you own separate
company with < 50 employees who are considered part of
your controlled group
Controlled Groups
ACA Terminology
• Controlled group = “applicable large employer”
• Each individual company = “applicable large
employer member”
• Some ACA requirements apply to “applicable large
employer” as a whole; others apply to the
“applicable large employer member”
Controlled Groups
Parent/Subsidiary
• For a parent and its subsidiary to be considered an applicable
large employer under the ACA, the parent must own at least
80 percent of the subsidiary’s stock.
Corporation A
80%
Corporation B
• A and B are an “applicable large employer” under ACA.
• Both A and B are considered “applicable large employer
members.”
Controlled Groups
Parent/Subsidiary
• If the parent company owns at least 80 percent of
the stock in more than one corporation/partnership,
then all of the entities are considered an applicable
large employer.
Corporation A
80%
Corporation B
85%
Corporation C
Controlled Groups
Parent/Subsidiary
• Ownership of less than 80 percent of a company is
not included.
Corporation A
80%
70%
85%
Corporation B
Corporation C
Corporation D
Controlled Groups
Parent/Subsidiary
• If one of the subsidiaries owns at least 80 percent of
a different company’s stock, then all the companies
are considered part of the controlled group.
Corporation A
80%
Corporation B
80%
Corporation D
80%
Corporation C
70%
Corporation E
Controlled Groups
Sibling Companies
• What if companies have common ownership
but don’t meet the 80 percent requirement?
• They may be an applicable large employer if:
– Five or fewer individuals or companies combined own at
least 80 percent of the stock in each;
– Additional requirement regarding 50 percent ownership
with identical percentages.
Controlled Groups
Sibling Companies
• Smith, Jones and Brown have the following ownership
interests in Corporations A, B and C:
Owner
•
•
Interest in A
Interest in B
Interest in C
Smith
50%
30%
60%
Jones
10%
30%
20%
Brown
10%
30%
20%
Corporations B and C may be an applicable large
employer under the ACA (because the three owners
combined own more than 80% of both corporations).
Corporation A is not included because three owners
combined only have 70% interest.
Combined Groups
• This type of controlled group arises from a
combination of a parent-subsidiary
relationship and a brother-sister relationship.
Smith
80%
Corporation A
80%
Corporation B
80%
Corporation C
Attribution Rules
• What is attribution?
– Legal principle that results in one person’s
ownership interest being attributed to another
– Attribution may play a part in controlled group
analysis
– Attribution due to family and corporate
relationships
Employee Eligibility
Full-time Employees
• Employees who regularly have 30+ hours of
service per week
– Same method of counting hours of service as
under “large employer” analysis
Employee Eligibility
Variable Hours
• Variable hour or seasonal employees who
average 30+ hours of service per week during
given time frame
– Traditionally not eligible
– Employers use a “lookback” measurement period to
calculate employees’ average hours of service
– May work for more than one controlled group member
Variable Hours
The Lookback Process
• In general, the lookback process for variable hour
and seasonal employees includes:
– Measurement Period: Time frame during which variable
hour and seasonal employees’ hours are counted to
determine whether they are FT
– Stability Period: Time frame during which eligible
employee must be allowed to retain coverage
– Administrative Period (optional): Short time frame
between Measurement Period and Stability Period
Variable Hours
New vs. Ongoing Employees
• Lookback timeline is similar for new and
ongoing employees, but not identical
• Regulatory guidelines for transitioning
employees from “new” to “ongoing”
Initial MP
• 3 mos-12 mos
• Employer
chooses start
date; must be
between date of
hire and first day
of next calendar
month
Administrative
Period
• Up to 90 days
• Time to perform
admin functions
and get the
employee onto
benefit coverage
Standard
Measurement Period
Overlapping
(<91 days)
Overlapping
New Variable
Hour Employees
Waiting Period
Stability Period
• FT: SP must be at
least 6 months
and at least as
long as IMP
• Non FT: SP must
be no more than
1 month longer
than IMP
Ongoing Variable
Hour Employees
Standard MP
• 3 mos-12 mos
Administrative
Period
• Up to 90 days
• Time to perform
administrative
functions and get
employee onto
benefit coverage
• Must begin
immediately after
SMP
Stability Period
• FT: SP must be at
least 6 months and
at least as long as
SMP
• Non FT: SP must be
no more than 1
month longer than
SMP
Step One:
Pay or Play Considerations
Action
Result
Offer “Affordable”
and “Qualified” coverage
No penalties
Don’t offer plan
Pay $2,000 per FT employee
Offer plan that is not “affordable”
and/or not “qualified”
Pay $3,000 per employee who goes to
exchange and receives federal subsidy
Step Two:
Establish Your Lookback Process
• Choose an IMP/SMP
–
–
–
–
12 months?
6 months?
Other duration?
Latest measurement period start dates are July 2013 to
September 2013
Step Two:
Establish Your Lookback Process
• Choose a Stability Period
– At least 6 months
– No less than one month longer than IMP
– At least as long as SMP
• Implement an AP?
– If so, how long?
– Consider interaction with Waiting Period
Step Three:
Categorize Your Employees
Number of Hours of Service
Action Required
Employee works or is anticipated to work
30+ hours per week
Offer coverage
Employee clearly works < 30 hours per week
(including paid leave)
Do not offer coverage
(CAUTION! Only for clear-cut cases)
Employee’s hours are variable, but could
average 30+ hours per week
(including paid leave)
Conduct analysis to determine
average hours of service
during measurement period
Employee is seasonal, but could
average 30+ hours per week
(including paid leave)
Conduct analysis to determine
average hours of service
during measurement period
Step Four:
Implementation
• Timing of implementation
– Plan year
– Regulatory requirements
– Open enrollment
Summary
• Large Employers - A New Way to Count
• Controlled group explanation and the implications
for your benefit planning/strategy
• Understanding employee eligibility, full-time and
variable hour employees
• Four-step implementation process overview
Additional ACA Resources
• ACA Calendar
www.Millercares.com
• ACA Glossary of Terms, ACA Tool Kits, webinar recordings,
future Learning Café opportunities
http://millercares.com/products/employeebenefits/health-care-reform-aca/
Thanks for your patience,
your perseverance,
your partnership.