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Capping Hours: Risk Outweighs Reward

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Employee benefits have become a hot topic in the business realm, especially in regard to the federal government’s Affordable Care Act. Ultimately, it comes down to dollars and cents, and companies are finding that a more affordable route may exist beyond offering traditional health coverage. However, if you are thinking of finding a loophole through lowering employees’ hours, you might want to think twice.

The Risk of Capping Hours

A recent idea to cap weekly hours has the majority of companies, expected to comply with the ACA’s employer mandate, considering this new approach. Capping an employee’s workweek at 30 hours would make him or her a “part-timer.” While the idea may sound great in theory, it could cause more harm than good.

Cheating the system potentially puts companies at risk of breaking another federal law: the Employee Retirement Income Security Act (ERISA). Section 510 of ERISA states that companies are prohibited from discriminating, in any way, against employees if the action (in this case “capping hours”) interferes with the attainment of rights to which an employee may become entitled. Decreasing employees’ hours to part-time status for the sole purpose of not having to offer health coverage may be in violation, so employers should take caution of the potential consequences, including litigation.

Should an employee choose to lay blame, the employer must show proven evidence that the action taken was a direct response to a logical business decision and not part of an effort to interfere with the employee’s right to benefits. If the worker can provide convincing counterevidence that the employer is being deceitful, he or she may claim not only the benefits owed, but other financial damages.

It’s Not as Easy as It Seems

It is advised that companies refrain from making significant workforce changes that could potentially violate the ERISA provision and, therefore, potentially result in a lawsuit. The legal ramifications and bad press are enough to make the cost of paying seem manageable. Furthermore, making employees part-time does not necessarily exempt companies from being labeled as a large employer under the ACA, which means affordable coverage still would have to be offered.  

Under the ACA, when deciding on whether your company qualifies for large-employer status, you must consider both full-time and full-time-equivalent employees. Full-time employees are those who have worked at least 30 hours a week or 130 hours of service per calendar month. To calculate the total of full-time equivalent employees, you will need to consider any employees that have worked less than 130 hours, which might include your part-time employees. The calculation looks like this,

  1. First, you calculate the number of hours of service for any employees that were not full-time for any given month (less than 130 hours but not more than 120 hours of service for any employee), then
  2. Divide the total hours of services for those employees by 120 to determine your total full-time equivalent employee count for any given month.

Once you add this number to your overall total, you could break the threshold, pushing your organization into large-employer status.

Non Looped Solution

Ramifications for violating Section 510 of ERISA should caution employers of the importance of accurately determining your part-time and full-time employee count before reporting is required. With the right tool, tracking is made easy. You quickly can generate reports showing employee hours when they are creeping toward 30 hours a week or full-time status. Having an HR system that makes it easy — versus trying to figure it out manually with spreadsheets — is extremely beneficial.

Can you accurately track your employee status?



Author Bio: Lauren is an enthusiastic writer who is passionate about numerous topics surrounding the HCM industry including talent management and acquisition, technology, document management and leadership, just to name a few. Lauren has been with Paycom for over a year and has taken on roles as a blogger, social strategist and community relations coordinator. In her spare time she enjoys DIY“ing,” exploring the city and keeping up with her two dogs, Deacon and Cookie.

ACA Awaits Repeal or Repair

ACA Awaits Repeal or Repair

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ACA Awaits Repeal or Repair

After his electoral win in November, President Donald Trump, buoyed by Republican majorities in the House and the Senate, vowed to act quickly to repeal and replace the Affordable Care Act (ACA). Pres. Trump has now been in office for a month, and Republicans have not yet voted to repeal the ACA, and have not agreed upon a potential replacement, leaving the date of “repeal and replace” somewhere in the uncertain future. stethoscope

Early strategies

When the current Congress convened in January, it moved quickly to begin the “repeal” portion of “repeal and replace” by passing a budget resolution. Because the GOP does not have a filibuster-proof majority in the Senate and cannot count on votes from Democrats to repeal the ACA, Republicans have decided to utilize a procedure known as budget reconciliation to dismantle it.

By using this procedure, Congress can pass a bill to repeal the ACA with a simple majority in the Senate. The reconciliation instructions in the budget resolution directed various committees to come up with proposals to repeal the ACA and submit them to the budget committees of the House and Senate. The reconciliation proposals would then be crafted into a bill by the budget committees, and the reconciliation bill would then need to pass both the House and the Senate before being signed by the President.

Potential outcomes

However, the provisions of the bill passed this way must target elements of the ACA that have a federal budgetary effect. Therefore, the ACA provisions that allow children to stay on their parents’ insurance through age 26 and the requirement that insurers cover preexisting conditions could not be eliminated using this procedure. Nor could the individual and employer mandates be eliminated in this way, but the amounts of the penalties could be reduced to zero, eliminating them in all but name.

Repeal or repair?

Republicans originally called for reconciliation proposals to be submitted to the budget committees by January 27, but that date has come and gone. Congressional Republicans continue to work on “repeal and replace,” but many of them have begun talking about “repair” of the ACA, rather than repeal, as they recognize the difficulty of legislating in this area.

In an interview with Fox News’ Bill O’Reilly on February 5, President Trump said that replacement could take until 2018.

O’Reilly asked “Can Americans in 2017 expect a new health care plan rolled out by the Trump administration this year?”

Trump responded, “We’re going to be putting it [the new healthcare plan] in fairly soon, I think that … by the end of the year at least the rudiments but we should have something within the year and the following year.”

Employer mandates remain in place

One thing that has become clear during the first month of the Trump presidency is that repealing the ACA is a much tougher prospect than many had thought. Despite the uncertainty with regard to the long-term future of the ACA, the current reality is that the ACA and the employer mandate remain the law of the land, and employers should continue to comply with the law’s requirements. Applicable Large Employers should file IRS Forms 1094 and 1095 no later than the March 31 if filing electronically, or February 28, if filing paper forms. Forms 1095-C must be furnished to employees no later than March 2. Large employers should continue to comply with the employer mandate, measure their full-time employees, and offer minimum essential coverage providing minimum value to those employees and their dependents.

Paycom will continue to monitor executive and Congressional action regarding the ACA closely and stands ready to help our clients maintain compliance.

 

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Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

6 Compliance Changes to Check in 2017

6 Compliance Changes to Check in 2017

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Compliance Deadlines and Issues to Watch in 2017

Employers can expect developments  in 2017 related to the Fair Labor Standards Act (FLSA), the Affordable Care Act (ACA), Equal Employment Opportunity Commission (EEOC) requirements and several other workplace regulations concerning compliance. Here’s a closer look.

 

  1. Fair Labor Standards Act

On Nov. 22, 2016, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas issued an injunction delaying the effective date of the new overtime rule. The rule would have raised the minimum salary threshold for exempt executive, administrative and professional employees to $913 per week, from $455 per week and the minimum annual salary threshold for highly compensated employees to $134,004, from $100,000.

How long the injunction will remain in place – and the fate of the rule – is anyone’s guess. Meanwhile, employers should adhere to current FLSA requirements and keep an eye out for the outcome of the Department of Labor’s current appeal.

 

  1. Affordable Care Act

Although the leadership in the House of Representatives currently is attempting to repeal ACA, for now, employers still remain responsible for all ACA tracking and reporting requirements. The deadline for issuing ACA forms 1095-B and -C to employees has been extended from Jan. 31, 2017 to March 2, 2017. However, the due date for filing ACA forms with the Internal Revenue Service (IRS) is unchanged. For 2016 tax year, applicable large employers must:

  • Submit paper forms 1094-B and -C and 1095-B and -C by Feb. 28, 2017

 

  • Submit electronic forms 1094-B and -C and 1095-B and -C by March 31, 2017

 

The IRS has extended the “good faith effort” penalty waiver to 2017. Employers who submit inaccurate or incomplete reporting information may be relieved from penalties, as long as they can show they made a “good faith effort” to comply with the ACA’s requirements.

Note that although the 40-percent “Cadillac” tax on high-cost employer health plans has been delayed until 2020, employers should consider assessing the impact of the tax on future business goals now. Once the impact is understood, a feasible strategy can be put in place.

 

  1. Equal Employment Opportunity Reporting

The EEOC has revised the Employer Information Report (EEO-1) to include collecting pay data from employers, including federal contractors, with over 100 employees.

Under the original proposal, employers would submit their annual EEO-1 report – which would include W-2 pay data and hours worked – to the Joint Reporting Committee by September 30 of each year. However, the EEOC has issued an updated proposal that would move the due date for the 2017 report from Sept. 30, 2017 to March 31, 2018. In subsequent years, the deadline will be March 31.

Be sure to monitor the revisions to the EEO-1 report, and prepare a strategy for implementation in case the changes are enacted.

 

  1. Citizenship and Immigration Services Reporting

U.S. Citizenship and Immigration Services recently updated Form I-9. After Jan. 21, 2017, employers must start using the new form.

 

  1. Minimum Wage and Paid Sick Leave

Many states, cities and counties have approved minimum wage increases and mandatory paid sick leave, some of which will take effect in 2017.

 

  1. Federal Contract Workers

The minimum wage for federal contract workers increases to $10.20 per hour Jan. 1, 2017. Certain federal contractors also must provide their employees with up to seven days of paid sick leave per year.

Staying ahead of potential and actual regulatory changes is easy with an HR and payroll system that generates the necessary forms and enables electronic filing to simplify reporting. It’s also important to partner with an HR technology provider who stays abreast of tentative regulatory matters and quickly updates their system accordingly, so that you have the right tools for any changes.

 

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.

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Posted in ACA, Blog, Compliance, Featured, FLSA

Heidi Lively

by Heidi Lively


Author Bio: Heidi Lively serves as Paycom’s Additional Business Manager, where she focuses on the compliance and service of additional business products. Previously, she served customers in the Paycom Service Department where she quickly rose through the ranks to earn a team leader position. Having performed in a leadership position for a number of years, Heidi has been able to cultivate and influence others through Paycom’s leadership initiatives. Heidi earned her bachelor’s degree from the University of Central Oklahoma.

Reimbursement: Small businesses can now reimburse employees who purchase their own health insurance

Small Businesses Can Now Compensate Employees Who Purchase Their Own Health Insurance

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Small Businesses Can Now Compensate Employees Who Purchase Their Own Health Insurance

New, small employer ACA requirements effective for plans beginning after Dec. 31, 2016

President Barack Obama recently announced a small gift for small businesses as it relates to insurance. Title 18 of the new 21st Century Cures Act, signed by President Obama on Dec. 13, 2016, allows small employers the use of Health Reimbursement Arrangements (HRAs) to compensate employees who buy their own health insurance for themselves and their families.

Reimbursement Amounts

Maximum annual benefits for the individual are $4,950 or $10,000 a year for families. Employers are to report the total amount of benefits received on their employees’ W-2 forms, beginning with the 2017 calendar year. After 2016, the above dollar amounts are subject to annual cost-of-living increases.

Reimbursement Details

The reimbursements are for the cost of employee health insurance plans purchased through the Affordable Care Act (ACA) marketplace or on the individual market, effective after Dec. 31, 2016. Reimbursements only can be funded by the employer, and cannot include employee salary reduction contributions. The employee’s out-of-pocket plan must provide for the payment or reimbursement of medical care expenses that are incurred by the employee or the employee’s family members and the employee must provide proof of health coverage to their employer. HRAs must be offered on the same terms to all eligible employees, but employers may exclude from eligibility employees who have not completed 90 days of service, have not reached age 25, part-time or seasonal employees, employees included in a collective bargaining agreement and employees who are non-resident aliens who have no earned income derived from sources within the U.S.

Notice Requirements

Small employers must give an annual notice to eligible employees:

  • at least 90 days before the start of the year, or,
  • at least 90 days before the employee’s initial eligibility date, or
  • no more than 90 days after the legislative enactment of the 21st Century Cures Act; whichever is later.

 

The annual HRA notice must:

  1. state the amount of the employee’s permitted benefits
  2. educate the employee on how to disclose the reimbursement amount to any health insurance exchange if an employee chooses to apply for the premium assistance tax credit
  3. warn about taxes that may be charged if the employee does not have minimum essential coverage each month
  4. remind the employee that the HRA may be included in Gross income

 

If the business fails to follow the above requirements, it will be subject to a $50 per-employee per-incident penalty, up to $2,500 per calendar year, unless the failures were due to reasonable cause and not willful neglect.

This HRA Isn’t for Every Employer

The 21st Century Cures Act created a new type of HRA called the “qualified small employer HRA” (SEHRA). The IRS code does not consider SEHRAs as group health plans, therefore making them unqualified for the excise tax levied on group health plans that don’t meet the ACA market reform requirements. If your company is considered an applicable large employer and/or has at least 50 full-time or full-time equivalent employees then you are not eligible to provide a SEHRA.  Additionally, you cannot provide an SEHRA if you offer a group health plan to any of your employees.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.

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Posted in ACA, Blog, Featured, Tax Credits

Heidi Lively

by Heidi Lively


Author Bio: Heidi Lively serves as Paycom’s Additional Business Manager, where she focuses on the compliance and service of additional business products. Previously, she served customers in the Paycom Service Department where she quickly rose through the ranks to earn a team leader position. Having performed in a leadership position for a number of years, Heidi has been able to cultivate and influence others through Paycom’s leadership initiatives. Heidi earned her bachelor’s degree from the University of Central Oklahoma.

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