Leading employee benefits attorneys recently discussed rules on calculating workforces and identifying to whom the employer must make an offer of coverage. Vanessa Scott, a partner with Sutherland Asbill & Brennan, Washington, D.C., and Malcolm Slee, of Counsel at the Groom Law Group, Washington, D.C.,discussed the counting and measuring rules spawned by health care reform during during a recent telephone seminar (sponsored by the American Law Institute), then they described the following exclusions employers should know about.
- Counting FTEs. Part of determining whether you’re an ALE is adding full-time equivalents (FTEs) to full-time employees (30 or more hours a week). Part-time workers cannot generate pay or play penalties by seeking subsidies on a health insurance exchange, but they must be weighed into employer counts, and they can tip the scales to make an employer company an ALE, triggering an obligation to offer coverage to full-time employees.To calculate FTEs, the employer must sum the hours worked by part-time (29 and fewer hours a week) and variable hour employees, and divide by 120, they said.
- Using a monthly measurement method. Employers are not required to use the look-back method with measurement and stability periods. Instead they can use a monthly method, in which the employer assumes more risk for administrative simplicity. When an employer determines that a given worker has worked 130 hours in a given month, the employer is expected to offer coverage to that worker. Under this method, the employer is willing to accept the possibility that some non-full-time employees might get coverage.This is a good option for companies whose workers have consistent monthly hours of service. But organizations with workers whose hours of service fluctuate between non-full-time and full-time status might prefer the look-back method to get a more precise eligibility count, they said.
- Using different measurement and stability periods depending on a variety of factors: salaried versus hourly employees; employees located in different states; collectively bargained versus non-collectively bargained employees; employees in different subsidiaries under a single controlling entity. (IRS Notice 2014-49 indicated how workers can shift from a position to which one measurement method applies to a position with a different method.)Documentation is an important aspect once the employer decides what it wants to do.As organizations comply with ACA’s eligibility rules, ERISA plans also need to document the measurement methods they use to determine employees’ full-time status in the plan document and summary plan description, according to a Marsh & McLellan policy paper. The SPD’s description of the measurement method should explain how an individual can determine if he or she is eligible under the plan in a way that is understandable to the average participant.The employer also will need to ensure that coverage eligibility and measurement approaches are consistent with collective bargaining agreements that are in effect.
- Adjustments to the definition of dependent. In final rules issued last February (79 Fed. Reg. 8544 (Feb. 12, 2014)), foster children and step children were excluded from the definition of dependent, as were spouses. Coverage offers are still required for biologic and adopted children.
- Falling into the 70-percent rule for 2015. A significant piece of the ACA is that ALEs that offer coverage to 70 percent of full time employees avoid a no-coverage penalty. But it does not shield employers from penalties from employees who got no offer of coverage, but instead obtained it on an exchange because the employer failed the affordability or minimum value tests. The standard rule requires employers to offer coverage to 95 percent, the attorneys said.
- A larger exemption for 2015 applies to the no-coverage penalty. The penalty will be calculated by reducing the number of full-time employees by 80, instead of 30. The normal rule was to reduce the full number of employees by 30 and then multiply the remainder by $2,000 per employee per year. For 2015, the ALE’s no-coverage penalty is calculated after subtracting the first 80 full-time employees.
- Non-calendar plan years. No penalties will be levied on plans before the first day of the plan year that begins in 2015, if as long as coverage is in place Jan. 1, 2015. Steps are expected to be taken to add dependent coverage in 2014 plan year if an employer avails itself of this safe harbor. Dependent coverage had to not exist before; it could not have existed in 2013 only to have employers terminate it in order to enjoy savings during the hiatus and pretend to be instating it for the first time in time for the 2015 plan year.
- Multiemployer plans. Employers will be viewed as having made an offer of coverage, if on their behalf a multiemployer plan makes a timely offer of minimum essential coverage (that meets the minimum-value and affordability tests and covers dependents) to their employees, under a March 2013 correction to proposed rules.
In an associated move, the U.S. Department of Labor has issued revised Form 5500 and 5500-SF forms that require multiple employer plans to identify each participating employer and estimate each employer’s percentage of total contributions during the year. Informational copies of the forms, schedules and instructions are available online at www.dol.gov/ebsa/5500main.html.