ACA Compliance Has Only Just Begun

460429191As 2014 draws to a close and the ACA’s employer mandate goes into full effect Jan. 1, many staffing employers are still struggling with the mandate’s various requirements. While the question about what health plan to offer has largely been addressed via so-called “minimum value” plans – albeit temporarily due to recent governmental guidance – staffing firms still have a lot of work ahead of them. 2015 will see a slew of new responsibilities that apply to contingent workforces now that coverage has been offered and accepted by employees – management of COBRA responsibilities, FMLA leaves of absences and more. However, one issue stands above the others when it comes to ACA compliance – how to handle employee coverage when they’re between assignments.

Most staffing firms I’ve worked with recently do not terminate temporary employees between assignments – a practice that’s been in place for years. The reasons for utilizing this practice vary, but they generally boil down to unemployment issues raised when employees are frequently terminated, and quite simply the administrative burden of having to “re-hire” the same employee potentially multiple times in a very short period of time. It simply makes more sense to put employees on leaves of absences between assignments unless there’s a compelling reason to formally terminate their employment (in which case, there’s very little likelihood that the employee would be rehired anyhow). However, staffing employers need to evaluate this practice in light of the mechanics of the ACA’s employer mandate. What does the government have to say about this practice?

Written guidance, along with informal responses to inquiries posed by Assurance’s legal team, suggest that the agencies broadly expect staffing employers to act similarly to non-staffing employers with respect to this issue – which is to say, employees on long-term unpaid leaves of absences (not related to FMLA or military leaves) should, in their view, be formally terminated in order to become eligible for COBRA coverage and, if applicable, unemployment benefits. Whether they take this view simply because they are not familiar with the unique business challenges of the staffing world, or because it’s a measured policy stance, isn’t clear. What is clear is that if a staffing employer is going to continue the practice of not terminating employees between assignments, very careful consideration has to be paid to how employee coverage is handled.

PREMIUM CONTENT: Overview of the ACA regulations as they impact staffing firms

As an example, let’s review what happens to an ongoing employee. Jill has worked for Temps Inc. since July 2013. Temps Inc. has a calendar-year health plan, and therefore a calendar year stability period for ongoing employees under the mandate. Jill is an ongoing employee, and worked the requisite 1,560 hours in the 2014 measurement period. She is entitled to coverage in 2015, and elects it. Jill continues her normal 40 hour/week assignment until March 10, when the assignment ends. There is no immediate assignment available to her during the next six weeks. Temps Inc. does not terminate employees between assignments, and therefore Jill simply remains on the books as “available” but not on assignment.

Because she’s an ongoing employee, she’s entitled to coverage during the entire stability period, regardless of the hours of service she accrues during the stability period. Since she’s still technically employed, Temps cannot terminate her coverage just because she’s not working. As long as Jill continues to make her contribution – perhaps by paying the carrier directly – Jill can remain on the plan (note that employers using the 9.5 percent W-2 safe harbor face an additional challenge in that Jill’s not earning any W-2 income during this time, and therefore the employer may not be able to effectively charge Jill anything during the absence – 9.5 percent of $0 is … $0 after all.)

So, what’s a staffing employer to do? My advice is to take a step back and consider the various scenarios that will arise in their workforce, and plan accordingly. Some staffing firms won’t have this issue – they already term employees between assignments. Others will need to ensure that their eligibility for benefits reflects this new reality. As always, paying close attention to the nuances of every part of the employer mandate rules is critical, especially for staffing employers, in order to remain compliant.

MORE: Who should pick up the ACA tab?


Mark Lam

Mark Lam
Mark Lam is vice president, benefits compliance at Assurance.

Mark Lam

Share This Post


Related Articles

One Response to “ACA Compliance Has Only Just Begun”

Powered by ·