PAYDAY Workforce Solutions Blog

Employers and employees alike are still confused about a lot of the requirements of the Affordable Care Act (ACA). Owners, executives, and administrators responsible for administering benefits all have to sort through and understand the myriad communications about the new law, and have to separate fact from myth about what they really have to do to comply.

Here we’ll help you sort out the most common myths out there and what the real compliance issues are.

ACA Doesn’t Apply to Employers with Less than 100 Employees

This is not true because ACA compliance requirements have certain conditions. It’s not automatically based only on numbers of employees. Employers who have between 50 and 99 full-time employees may be exempt from penalties in 2015 but only if they qualify for transition relief.

One of the requirements for transition relief is having 50 to 99 full-time employees in 2014, but employers can’t have reduced the size of their workforce or hours of service to evade ACA compliance, and can’t have eliminated or downgraded health coverage offerings.

Employers with Less than 100 Employees Don’t Have to Provide Information Reporting

This is a misconception as well, based only on the employer size. Employers with 50 to 99 full-time employees must complete information reporting for the 2015 calendar year, even if they aren’t subject to participation rules. This is because of the look-back aspect of ACA to determine requirements for compliance. Employers are determined to be ALEs subject to ACA rules and regulations based on number of full-time employees (FTEs) or FTE equivalents employed the year prior. Even if an employer is not yet required to offer insurance for 2015, the reporting is still required.

Employers Can Avoid ACA Requirements by Making All Employees Part-Time

Simply changing employee status to part time doesn’t get employers off the hook for ACA compliance because it’s based on hours of service, not employment status. Part time status means the employee works less than 30 hours per week and 130 hours per month. Those who work more than that are considered full-time and must be offered adequate coverage to avoid penalties. Only strict adherence to fewer than 30 hours worked per week with a true part-time workforce can avoid penalties.

Employers Can Reorganize Their Business to Avoid ACA

The IRS does not allow this kind of circumvention of the law. A “controlled group” analysis under the Internal Revenue Code is required to determine if an employer is subject to the ACA. Different business entities under common ownership or control are considered one business entity for IRS regulations and the Tax Code, which could make a business entity subject to penalties for noncompliance, even if employees are spread across multiple entities.

Employers with Plan Years Starting in July Don’t Have to Offer Coverage in Earlier Months

This is not true. There are tests to determine if businesses with plan years that don’t start at the beginning of the year qualify for transition relief. To qualify, the employers must have kept a non-calendar year plan since December 2012, can’t have modified it since then, and they must meet one of three complicated safe harbor tests.

Understanding the requirements of and how to comply with the Affordable Care Act are not easy. Actually achieving compliance depends on both knowing the requirements and how they apply to your business and then taking the necessary steps. That means determining how many full time equivalents you have, reporting on your workforce and coverage, using new IRS forms by the deadline, and finding reliable sources of information and assistance. Separating myth from facts is just the beginning, but taking action is critical. Take action by contacting the experts at ACA to ensure that your business is in compliance with the ever changing laws.


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