Tracking variable hour employees – when should employers look to outsource?
As part of the Employer Shared Responsibility Provision going into effect on January 1, 2015, employers are required to extend coverage to employees working 30 or more hours per week. Sounds simple, right? Not necessarily. As it turns out, many employers with variable hour employees are struggling to determine which of their employees have averaged more than 30 hours per week.
Employers with large numbers of variable hour employees may want to consider partnering with a vendor to assist in this tracking. Payroll organizations may also have resources for tracking these employees.
Read on for several reasons to consider for outsourcing variable hour tracking of your employees:
- If a variable hour employee averages 30+ of work, that employee will be considered full-time. If that employee was not offered coverage and receives a subsidy in the marketplace, the penalty to the employer is $3,000. This is a penalty for the year, but will be prorated for the months in which the employee received the subsidy.
- Example – An employer has 100 employees who are not scheduled to work 30+ hours and are not offered coverage, but average over 30 hours (FTE) due to a varying schedule.
- If these 100 employees receive a subsidy, the penalty to the employer is $300,000.
- Penalties are non-tax deductible.
- Responding to IRS request for information:
- Before a penalty is assessed on the employer, the IRS will request information from the employer on the employee who received the subsidy.
- Responding to an IRS request like this can become difficult without a comprehensive tracking system, since the employer would have to go back to payroll records from 12+ months prior.
- A vendor will complete this request for information.
- Challenging regulations for tracking employees on leave:
- The hours when an employee is on leave are calculated differently than regular time not worked.
- FMLA & USERRA have one set of rules, while disability follows another.
- Each variable hour new hire will have their own initial measurement period:
- For employers with large numbers of new hires or acquisitions, as well as high turnover, this will be a significant challenge.
- A tracking system will manage each of these initial measurements periods with raw payroll data and notify the employer if an employee will be eligible for coverage.
- The system automatically transitions the new hire from the initial measurement period to the standard measurement period.
The reporting laws for the 2015 tax year are complex. Click here for full details on these requirements, and keep in mind that a tracking system provides all the information needed to complete these forms.
The Affordable Care Act has undeniably placed greater administrative responsibilities on employers. If you are an employer that may need to outsource, reach out to your WGA representative for more information on the options available to you.
About the Author
Kate O’Sullivan is a Client Service Manager at WGA in the Employee Benefits Group. She is responsible for servicing a number of small, mid-size and large accounts, and works on the WGA Health Care Reform Committee.