January 1, 2015 - Pay or Play

from Zywave.com January 1, 2015 - to Pay or Play??
I know this is such a basic question to ask as of October 31, 2015. But I seem to always confuse myself and wanted to get some clarification. It seems that most of my clients are either definitely ALE's or not. Pretty black and white and I have enough background knowledge about most of my clients that I don't have to get in the weeds to determine ALE status, etc. But now I have a fast food franchise with about 170 employees contacting me wanting me to assist them with Health Care Reform. I know there are 2 steps to this - 1) ALE Determination - do you have 100 or more FTE's? 2) If you do, then Pay or Play. That seems pretty simple and straight forward. Where I lack confidence is in the below. I need to get clarification on this if someone would be kind enough to correct me where I may be inaccurate below: 1) to determine ALE for January 1, 2015 - Use 6 consecutive months that does not end before July 1, 2014 and calculate Full Time Employees and Full Time Equivalents, add both together. If your sum is greater then 100, then you are ALE for 1/1/15 (or you have transitional relief if you have existing plan with , bla, bla, bla...)??? Is that correct so far??? 2) If you are ALE and need to start Paying or Playing by 1/1/15 - then - you can do the same thing as above and use the 6 consecutive months (transitional measurement period) and then look at the average hours worked per month or per week and determine who is more than 30 or 130 hours per week or month respectively? Then those FT'ers are the ones that you need to offer coverage to in order to eliminate the penalty (i know other details in the above about Tax A and Tax B, 80 employee credit year 1, etc...).... So my questions are really around for 1/1/15 to exactly determine ALE status and then the measurement period for 1/1/15. I may have it right above, but I would like someone to tell me I am accurate before I get myself into trouble. Thank you. Paul
Posted on: 10-31-2014 02:13 PM

Hi, Paul. The government definitely managed to take something that should be so simple (how big am I, who are my FT employees, and when does the mandate start for me) and make it quite complicated.

On your first point, the counting isn't even necessary if the group has well over 100 employees regularly working 30+ hrs/wk. The only point to the ALE count is to figure out:
- Am I subject to Play or Pay (yes or no)
- Am I in the 50-99 space where I might be able to qualify for that relief (yes or no, and merely being 50-99 is not enough to qualify for relief, there are other tests to satisfy as well, so the client shouldn't get too excited yet)

The count is not needed for any other purpose. We find we only need to get into the weeds on the technical nuances of the counting when:
- A group might qualify for 50-99 relief, or
- A group might be <50

When you do the counting because one of those 2 issues might be present, it is extremely important to get three points across:
- First, people's FT or PT employment status is ignored. You are counting ACTUAL HOURS OF SERVICE by CALENDAR month. Anyone with 120 hours of service in a given month is counted as a FT person that month. Anyone under 120 hours of service in a given month, you count their hours for that month, and then you'll convert all PT hours into equivalents.
- Second, hours of service does include ALL hours for which a person is or should be PAID, including paid holidays, paid jury duty, paid sick time, paid on-call, etc.
- Third, the seasonal exception does NOT allow the use of a shorter 6-month period. The entire calendar year must be evaluated to determine whether the seasonal exception may be utilized. I'll tell you from experience that many, many groups that think they shouldn't have to count seasonal actually don't qualify for the seasonal exception, so they need to understand it well.

Stating you're not subject to the mandate when you're close to the 50 mark, or stating you get another entire year exemption from the mandate when you're close to the 100 mark, is a BIG DEAL, so they MUST get it right and not take it lightly.

On your second point, if a group needs to adopt the look-back method and is going to utilize a 12-month measurement period with 12-month stability period, then the first measurement may be as short as 6 months but must begin no later than 7/1/14 if it's going to be shortened this first time.

For a January group, they're likely measuring mid-October to mid-October, so that first measurement would begin no later than mid-April. Just keep in mind that if the summers are busy and hours tend to be higher, they may benefit from measuring all the way back to last October to capture the lower winter hours and bring averages down.

I also frequently talk through the correct way to use pay periods to measure, because most employers are finding their systems incapable of running hours of service from Oct 15 to Oct 14 (or on new hires from x date to y date). So with every single group I've talked to, we go through in detail how to do pay periods correctly (since the government made that equally complicated, too).

Hope this is helpful!!

Thank you KC.

Few other questions:
1) i thought if your FTE was 50 to 99 then you didn't have to comply until 2016? I also know that there are the 3 "tests" that Zywave has in a document. Are those the "tests" you are referencing? Anything else I should be aware of?

2) you reference the short measurement period in 2014 for January 1, 2015. If you use the short measurement period of 6 months in 2014 can you still use 6 month measurement in 2015? I think so, but I would like your thoughts on this as well...?

3) assuming the above is yes, what are you recommending for your clients? I have been recommending 6 month measurement, 2 month admin, 6 month stability. What about you and why?

thank you in advance.

paul

1) Being 50-99 isn't enough on its own to get the relief. The other tests include not reducing workforce size and overall hours in 2014, not removing any classes from eligibility in 2014 or 2015, not reducing the employer's contribution below certain thresholds in 2014 or 2015, and not changing the current plan below MV in 2014 or 2015.

2) You can only use a short 6-month measurement this one time in 2014 coupled with a 12-month stability period in 2015 if you intend to use a 12-month measurement/stability process. If you're not intending to use 12-month periods, then the 6-month measurement done in 2014 needs to be coupled with a 6-month stability period in 2015 (because any measurement/stability outside of the one-time transition relief needs to be the same length). Also, I don't believe the one-time short 6-month measurement with 12-month stability is available for groups that get 50-99 relief. They'll have a full 12-month measurement in 2015 for their 12-month stability period that begins in 2016.

3) We are of the opinion that 12 months makes the most sense, with a 2 1/2 month admin. There are several reasons why we feel this way:
- The beneifts (deductibles, OOP limits) are annual, so it's easiest to communicate benefits when they're being elected for an entire year
- If you allow look-back to make those ees eligible for other benefits like FSA, dental, or vision, those are easier on the employee and carrier when you enroll once a year and don't have lots of people becoming ineligible mid-year (the FSA is particularly difficult to administer mid-year loss of eligibility and COBRA)...I'm not sure I'd open up FSA, dental or vision for anything less than a 12-month look-back process because elections toward FSA and deductibles and OOPs on the den/vis are all based on a full year
- Aligning the stability period with the plan year is easy on everyone to understand and administer (ee and family, HR, HRIS online enrollment provider, carrier)
- Ongoing variable hour just sign up at open enrollment like all the other regular FT ees
- Integrating new variable hour stability periods into their next ongoing stability period only has to be handled once a year, so the visual chart of how to navigate that is simplified for HR
- By extending the admin period as long as possible, you have a good census to give your carrier for underwriting your renewal as early as possible (giving them a census every 6-months may result in a mid-year re-rate if the census is changing by 10% or more) and a good list of eligibles to give your online enrollment vendor
- We recommend 2 1/2 months on admin so employers can probably get away with using pay periods without exceeding 90 days. Using a CY plan example, if they always start with the pay period that begins after Oct 4th and end with the pay period that includes Oct 4th (because Oct 3 is the earliest they can stop measuring without exceeding a 90-day admin), they should always be fine.
- COBRA isn't always easy, so only having to work on lots of COBRA notifications once a year instead of twice a year means one less semi-annual opportunity to make a potentially costly error
- Typically the hours average out lower over the longer 12-month period than over 6-month periods that may include seasons of higher hours
- Employers we've talked to about variable hour usually find the amount of workers that are still around for 6 or 8 months is much greater than those that are still around after 12 or 13 months, so less ees wind up being eligible just due to natural turnover
- I'm sure there are other reasons I'm not thinking of right now

January 1, 2015 - Pay or Play

No Comments