PPACA Series: 3 Steps to Managing your Workforce
In the previous articles we explained that the size of your workforce will be a key determinant in how troublesome your compliance will be under PPACA. If you have over 50 full-time equivalent employees you will be subject to potential Pay or Play penalties which could cost you tens of thousands of dollars. While this sounds scary, one of the unique aspects of PPACA provides an opportunity for employers to manage this risk by managing your workforce. While the eligibility threshold for the Pay or Play penalties counts Full-Time Equivalent (FTE) employees, the actual penalty calculation phase only counts actual full-time employees. Understanding this key feature of PPACA will help employers (especially those who utilize significant numbers of part-time employees) manage their workforce to minimize or possibly eliminate potential PPACA penalties.
An employer that exceeds the 50 FTE threshold for the exposure to PPACA Pay or Play penalties should consider some simple steps to reduce the number of full-time employees used to calculate the actual penalty. Following are some simple, commons sense approaches you may want to consider:
- Consider Reducing Hours for some Full-Time Employees: Since the Pay or Play penalty is assessed only for full-time employees, the fewer full-time employees the lower the potential penalty. Since the new criteria to be qualified as a full-time employee is 30 hours or more per week, consider scheduling as many of your employees as possible to 30 hours or less.
- Learn to Use Variable Hour Employees: Our old vocabulary was that an employee was either full-time or part-time. The new regulations create a new category, variable hour employee. This is an employee that the employer cannot reasonably estimate the number of hours they may work. If a new employee is hired as a variable hour employee, the employer can wait as much as 12 months (the Measurement Period) to determine how many hours the employee actually averages before they need to offer them benefits.
- Employees with Other Coverage: While an employer cannot ask certain questions of new employees during the hiring process, certain types of employees are more attractive under PPACA than others. Employees who have other coverage through Medicaid, Medicare, Tri-Care (veteran’s benefits), parent’s coverage, or spousal coverage may limit your exposure to penalties. You will not be able to use these criteria for employment but knowing these facts will allow you to better estimate your potential penalty and provide some peace of mind to you prior to your calculation.
These are just the 3 most basic steps can consider when hiring and scheduling your new workforce under PPACA. If you would like to hear about some others please look for our next blog or just give me a call at (913)831-0999 and we’ll be glad to discuss all your options.
Previous posts in the PPACA series:
Ten new words you’ll need to know to understand healthcare reform
Understanding the Patient Protection and Affordable Care Act
"Want to learn more? PPACA is a complex law and will affect each employer differently. McInnes Group provides this blog series as a sample of various strategies that may work for some employers. We encourage you to contact Dennis at email@example.com or at their website at www.mcinnesgroup.com to get specific advice to help you develop a customized strategy for compliance."