The SESCO Report – March 2013
The Affordable Care Act — What to do Now!
As time nears for implementation of key provisions of the ACA, it is critical that employers begin to determine how the regulations will affect their business costs and employee relations environment.
The following are the basic steps in determining coverage of the ACA and considerations for both large and small employers:
1. Determine if you are a large or small employer — A large employer for the purposes of the Affordable Care Act's play or pay mandate is 50 or more employees. To determine if your organization is covered under the "pay or play" mandate, consider the following calculation:
• Employer is considered a large employer for the calendar year if it employed on average, at least 50 full-time employees including "full-time equivalent employees" (FTE's) during the previous year. To calculate FTE's, use the following guide:
# _____ full-time employees (those who work an average of 30 hours or more per week) in the month
# _____ full-time equivalents in the month (total hours worked by all part-time employees for the month (but not in excess of 120 hours for any such employee) ÷ 120 (retaining any fractions)
# _____ total FTE's for the month.
Then, total the FTE count for each calendar month and divide by 12. If the total for the prior year is equal to or exceeds 50, the employer is subject to the pay or play mandate. In calculating this final number, disregard any fractions. For example, if the final average is 49.9, round down to 49.
For employers who are close to meeting the threshold for the 2013 look-back year, they may be able to qualify for special transition relief that allows the employer to use any 6-consecutive month period during 2013, rather than the entire year. This may allow employers the time to apply the measurement period, have several months to analyze the results, determine whether they need to offer a plan, and then choose and establish a plan.
A special rule for seasonal workers allows employers to avoid the pay or play mandate if they exceed the 50 FTE threshold for 120 days or fewer during the look-back period solely because of seasonal workers. The guidance allows employers to use either the 120 days or a four calendar month period for purposes of this special rule. The guidance defines "seasonal worker" as including a worker who performs labor or service on a seasonal basis, retail workers employed exclusively during holiday seasons and, pending further guidance, any other reasonable, good faith interpretation of the statutory definition as adopted by the employer (any such interpretation should be made with the assistance of legal counsel).
For those employers who have less than 50 as determined above, you are not required to provide healthcare. There are no penalties or fines or other mandates. However, all employees (individuals) must obtain healthcare whether it is through you if you offer it or through health exchanges.
For those less than 50, the one noticeable concern for 2013 and beyond are the significant increases in health insurance costs. Health providers such as Blue Cross and UnitedHealth are gearing up for the increases in cost and thus are charging more. SESCO predicts up to 40% to 50% increases in healthcare costs. As such, small employers will need to determine whether or not they wish to absorb these increases and provide health insurance as part of their benefit offerings or delete health insurance as a benefit and forcing individuals and their families to the exchanges. Obvious factors for consideration include:
• Cost of increases/coverage
• Recruitment/retention/employee morale challenges
If you are a covered employer, re: those large organizations which employ 50 or more full-time equivalents, you must determine whether or not you are going to pay or play. The law does not require employers to provide health insurance but for those who do not, there is a penalty/tax for not doing so.
Therefore, the factors for consideration include:
• Staffing structures (part-timers)
• Employee recruitment/retention/morale
Pay Mandate — Those large employers who decide to pay the penalty (not provide health insurance to its employees meeting the minimum standard requirements) will be fined $2,000 per full-time employee less the first 30 full-time employees from actual total number of FTE's. For example:
Employer has 51 full-time employees:
- 30 FTE's = 21 FTE's
21 x 2000 or $42,000 per year.
Play Mandate — The play provision means that employers will provide health insurance meeting the minimal essential coverage. Employers must cover at least 60% of the cost of the "minimum essential coverage" for employees and the total employee cost for health coverage cannot exceed 9.5% of the employee's income. Further, benefits must include:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance abuse disorders including behavioral health treatment
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventative and wellness services and chronic disease management
- Pediatric services including oral and vision care
Under the play scenario, health insurance providers will help design your plan to ensure that it meets the minimum essential coverage requirements. However, you as the employer have one other decision to make — who will be considered full- or part-time for healthcare coverage. Healthcare coverage must only be provided to those who work 30 or more hours per week. Many organizations have elected to reduce working hours to less than 30 so that health insurance cost/coverage is not required for those employees.
This determination must be made now or no later than July 1st as beginning in 2014, part-time employees will be determined based on a look back period which is typically the last six (6) months of 2013. You will take an average of hours worked.
Therefore, those employers who do not want to provide health insurance to "part-time" employees (29 hours or less on average), must change schedules to meet the look back period for determining part-time employees from July 1, 2013 to December 31, 2013.
For those who need assistance in determining coverage as a large or small employer or in calculating employees' FTE's for coverage under a group health plan, please contact SESCO. Also, SESCO has updated its compliance guide to reflect the latest changes/regulations to the ACA.
Finally, one option for larger employers may be to consider self-insuring. However, know that self insurance creates a high level of risk on the employer as self insurance is exactly what it says — the employer self-insures and is responsible for employees' medical and healthcare costs.
For those employers who are hoping that this regulation is going away — it is not. Also for those employers who are thinking about "rolling the dice" as to compliance, we strongly suggest that you do not. All employers will be required to complete online IRS forms as to their compliance with the program. These forms are directed to the IRS and reviewed by IRS agents monthly. Therefore, ACA has a built-in compliance mechanism making it almost impossible for employers not to be checked for compliance.
Wage and Hour Exemption Misunderstandings
SESCO was founded on the basis of Wage and Hour accounting/compliance back in 1945. As such, we've had a long and prosperous history in assisting employers across the country in understanding and complying with the regulations to include who is exempt vs. nonexempt. "Exempt from" the regulations basically means that employees do not have to maintain time records nor receive overtime for hours worked in excess of 40 hours per week or as required by individual states.
In our auditing practice, we have come across a number of common misunderstandings/misconceptions regarding whether or not an employee is exempt vs. nonexempt. These include:
1. Employees who are paid a salary are exempt. Exempt determinations are based on job duties and responsibilities, not on the fact of being paid by the hour or by salary. The exemptions as issued include the Executive, Administrative, Professional, Outside Sales, Computer and Highly-Compensated exemptions.
2. If an employee's job title is that of manager, supervisor or administrator, he or she is exempt. Title alone is not the deciding factor. In fact, when being investigated by the Department of Labor, Wage-Hour Division, investigators do not request job descriptions or job titles. They interview employees to determine what they are doing most of their time to determine whether or not they are exempt.
3. Highly-Compensated employees are exempt. Highly-Compensated employees are likely to be exempt, but salary alone is not the sole determining factor. Even though employees are paid $100,000 or more guaranteed on an annual basis, the investigator will determine whether or not these employees have authority to include independent discretion and judgment.
4. Employees who are college educated and perform white-collar office work are exempt. Just because someone has obtained a four-year degree does not equate to the Professional exemption. To meet the Professional exemption, the four-year degree must be required/pertinent to the job being performed.
5. Employees who have advanced degrees are exempt. Again, just because an employee may have an advanced degree such as a Master's in Business does not mean that they are automatically exempt. Job duties alone are the determining factor.
6. If employees prefer to be paid on a salary and do not want to record their time, is it okay to treat them as exempt? Employees cannot waive their rights under the Fair Labor Standards Act. If employees refuse the overtime owed to them as determined by an investigation, the money will be sent to the federal treasury. Further, if there is no record of time worked, the investigator will interview employees and determine time based upon their own judgment and interviews.
7. If employees have been classified as exempt don't work overtime, it doesn't matter if they are misclassified. This is true; however, the employer still could be violating provisions of the Act to include recordkeeping requirements. However, most commonly the investigator will not levy fines (not guaranteed) but require future compliance. However, if you do not have time records, there are many challenging situations that could arise such as meal periods, breaks, time off and personal leave that could cause trouble and fines during an investigation.
Understanding who is exempt and who is not is extremely difficult. In fact, the regulations are such that they are difficult to understand and more difficult to apply. All employers, no matter how large or small, should conduct an annual audit of their compensation practices to determine compliance. Compliance is attainable and affordable for all employers. However, non-compliance is extremely expensive to include:
• Two (2) or three (3) years back wage liability to include fines and overtime payments.
• Civil action which includes four (4) years back pay plus attorney fees.
SESCO specializes in Wage and Hour accounting and we would certainly welcome the opportunity to discuss our Wage and Hour and Human Resource Management Compliance Assessments.
Discrimination Suits Increase in 2012
U.S. employers had more litigation in 2012 than in any other year. Further, most employers expect that litigation will increase in 2013.
The cost of labor litigation rose 41% — excluding settlement. This represents an increase of more than $100,000.
It is incumbent upon employers to understand and comply with all EEOC as well as other human resource federal and state employment regulations as the cost of defending such alleged wrong doing can be extremely costly.
Type of claim (most common to least):
• Sex Harassment
• National Origin
A "reasonable cause" finding was reached in nearly 40% of the EEOC's investigations in 2012. The monetary recovery in 2012 was $36.2 million (does not include legal fees or other associated costs).
It behooves employers to audit all screening and hiring, employment as well as separation practices and processes. Preferrably before any termination is processed, you should consult your SESCO consultant to consider all levels of risk and potential claims.
Special Thanks to New SESCO Clients!
New Horizons Health
The Daily Planet
Capital Area Home Health
Capital Area Health Network
New Port Richey, FL
Buchanan General Hospital
New River Valley Retirement Community
New Federal Poster Required Immediately!
Employers with 50 or more employees must obtain and post the new federal poster. Family and Medical Leave and other revisions have been made on the current poster. SESCO will provide these posters as follows:
Retainer Clients: $15.95
Non-retainer Clients: $21.95
Contact SESCO to order your compliant six-in-one federal poster or click HERE for our online publications store. (state poster kits are also available through SESCO).
SESCO Client Inquiry — Staff Response
Question: Are we required to offer continued health care insurance coverage (COBRA) when an employee leaves our business?
Answer: Employers with 20 or more employees offering health care coverage are required under certain circumstances to offer continuing coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to qualified beneficiaries. The employee must have been enrolled in the employer's group health plan at the time of termination. The employee (and his or her dependents) are not eligible for continued coverage if the employee was released for gross misconduct.
Employers with less than 20 employees that offer health care coverage to their employees may also be required to offer continued or converted health care coverage to terminated employees. These requirements vary from state to state. If you have questions about your state's requirements, feel free to contact us at SESCO.
Special Insert -Spring Seminar Series 2013
Human Resources – The Basic Course – April 10-11, 2013 (Richmond, VA)
April 10-11, 2013(Bristol, VA)
Pre-employment Recruiting, Screening, and Hiring
The Importance of Employee Handbooks and Clear Discipline Policies
Determining Pay Rates and Developing Compensation Systems
Effective Performance Appraisal Systems
EEOC and Wage-Hour Regulations and Practices
ADA, FMLA, COBRA, Workers' Comp Compliance
Human Resources – The Advanced Course – April 24, 2013 (Richmond, VA)
April 17, 2013 (Bristol, VA)
Responding to EEOC Charges
Strategic Planning for the Human Resource Department
$375.00 per person for 2 day classes and includes comprehensive take-home materials ($275.00 for 1 day)
Richmond, Virginia Location:
Virginia Community Healthcare Association (VCHA)
3831 Westerre Parkway — Henrico, VA 23233-1330
Bristol, Virginia Location:
Courtyard by Marriott
3169 Linden Drive — Bristol, VA 24202
Earn 12 HRCI Credits and 1.6 CEU Credits for Effective Leader/Manager seminar
Earn 13 HRCI Credits and 1.6 CEU Credits for Human Resources – The Basic Course
Earn 6.5 HRCI Credits and .8 CEU Credits for Human Resources – The Advanced Course
For complete information and registration click HERE or contact Lacey Johnsonl by phone at 423-764-4127 or e-mail: firstname.lastname@example.org to register.