PPACA – PART I: Eligibility Factor
As noted on July 2nd, HR Strategies is continuing to take a hard look at the health reform in order to provide some clarity and guidance regarding PPACA’s impact on our clients and businesses everywhere. This three part blog series will offer analysis and interpretation on the important factors/elements of PPACA, including a timeline of applicable changes.
Eligibility factor: Some of the provisions of the health reform are based on the number of employees. Companies with fewer than 50 employees will not be subject to the “Play or Pay” Mandate. The IRS has issued proposed regulations that provide for calculating the numbers of employees as follows:
Employees who work 30 hours per week are considered full-time employees. Part-time employees are “converted” to full time equivalent, based on a 30 hrs work-week. For example, a company that has 35 full-time employees and 50 part-time employees who work 15 hrs per week, would produce the following equation: total full-time employees (35 regular FT) + 25 full time equivalents (50 part-time@15 hrs. week) = total of 60 employees. Therefore, the “Play or Pay” mandate would apply to the company.
Bear in mind, there are lookback and stability periods, which means that the determination is based on a lookback period of time (typically the prior 12 months before plan year effective date) and a stability period, which is based on volume or spikes in hiring within a set time. Temporary and seasonal employees will typically count against the total number of full-time equivalents, especially if those positions are on-going. There are exceptions to this rule: if the spike in hires is truly due to seasonal increases in volume, i.e., agriculture (harvest season), tourism (high-season), and after season is over the number again falls below the 50 employee threshold, then the “Play or Pay” mandate may not apply. All of these variables are still under consideration and await clarification from the appropriate agencies. Also, the IRS may revise its guidance in final regulations.
Part II of our examination: “Considering the Impact of Play or Pay”, will be highlighted this Wednesday 7/18, be sure to check back for important guidance on what this mandate can mean for your company.