Beginning in 2015, the Affordable Care Act employer shared responsibility provision requires large employers (50 or more employees) to offer minimal essential coverage to full-time employees and dependents (excluding spouses) and offer coverage that is deemed affordable and of minimum value (60%) in order to avoid a penalty. The provision places a significant burden on payroll, timekeeping and employee status tracking. Find out if your systems are ready!

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Health Care
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Article reprinted from Winter 2014
IDEAS TO HELP GROW YOUR BUSINESS
Payroll
Is Your Payroll System Ready for the ACA?
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eginning in 2015, the Affordable Care Act (ACA)
employer shared responsibility provision requires large
employers (50 or more employees) to offer minimal
essential coverage to full-time employees and dependents
(excluding spouses) and offer coverage that is deemed
affordable and of minimum value (60%) in order to avoid a
penalty. The provision places a significant burden on payroll,
timekeeping and employee status tracking.
Employers must prepare a new process to include
employee counts, employment status and health plan cost – all
of which continue to compound the payroll operations process.
Employers will need a combination of information to analyze and
make decisions about status as an applicable large employer,
the offer of health coverage and their risk for penalty.
The employer shared responsibility requires the employer
to calculate the number of full-time employees (including
seasonal) and full-time equivalents for each calendar month
for the preceding calendar year by adding the number of
total employees and dividing the sum by 12 (for fractional
results, round down). The result is the average number of
full-time employees. If this total count is less than 50, the
employer is not subject to the employer shared provision for
the current calendar year. If the total count is greater than 50,
the employer is subject to the employer shared responsibility
provisions for the current calendar year. A seasonal worker
exception may apply if the total number of employees exceeds
50 for 120 days or less during the year.
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The penalties are assessed if the employer employs a
credit employee. A credit employee is one who receives a
premium tax credit or cost sharing assistance when purchasing
coverage through the Marketplace. Calculated monthly,
penalties are of two “so called” types:
1. No Coverage Penalty: If the employer does not offer
minimal essential coverage to at least 95% of its full-time
employees and has at least one credit employee, the
penalty is $166.67 per month per full-time employee (less
the first 30).
2. Inadequate or Unaffordable Penalty: If the employer offers
minimal coverage that is unaffordable (i.e., employee’s
premium exceeds 9.5% of household income) or coverage
does not meet minimum value and the employer has at
least one credit employee, the penalty is the lesser of $250
per month for each credit employee or the “No Coverage”
calculation previously described.
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Payroll, HRIS and timekeeping systems are valuable
sources of information for employers to perform essential
calculations in order to determine their status as an applicable
large employer. However, other information will be needed to
determine who must be offered coverage to avoid employer
shared responsibility penalties.
Oftentimes, employees are hired with variable work schedules,
making it difficult to track hours. The law permits use of a
tracking period (known as a measurement period) to look back to
determine those employees’ status as full-time or not. Additional
information will need to be included in determining variable
employees’ status during the measurement period, such as unpaid
leave hours. Based on hours worked during a measurement
period, an individual is deemed full-time or not during a
corresponding “stability period” of at least the same duration.
Payroll systems also will be essential in determining plan
affordability. Wages reported in Box 12, Code DD of the Form
W-2 will be compared with payroll deductions for health plan
premiums to aid in determining whether the employer’s health
plan is affordable.
Employers should review data results in the coming months
to make decisions and determinations about the offering of
health coverage. Many house this required information in
various internal locations, including payroll, benefit and HRIS
systems and spreadsheets. By utilizing multiple sources of
data to achieve the desired reporting results, an employer may
experience inefficient manual processes and difficulty defining
employee status. Employers may opt for a centralized solution
that maintains all pertinent data in one location internally or
outsource the task to relieve the administration burden.
Payroll operations for large employers (over 200) must
also consider the delayed ACA requirement of automatic health
benefit plan enrollment to include opt-out provisions. Small
employers should be mindful of the evolving Small Business
Health Care Tax Credit.
The employer shared responsibility provision presents
challenges in decision making, compliance, determining status
and how to avoid potential penalties. The increased complexity
and additional burdens on a payroll operation of any size
employer should be a priority as final regulations are released
and 2015 approaches.
DAISY HERNDON
CBIZ Payroll, Inc. • Roanoke, VA
540.853.8077 • dherndon@cbiz.com