This week we have a few really valuable and informational articles in store regarding Affordable Care Act. Kicking things off is this piece from TempWorks CEO David Dourgarian. The article is an abridged version of a letter sent to TempWorks Software clients. To find out more information about what’s written below, feel free to contact TempWorks or else read a little more on their universal healthcare page.
Also check back to Staffing Talk on Thursday for an excellent Q&A with three healthcare insurance brokers on how paying penalties probably isn’t your most cost-effective option, and a simple breakdown of how to avoid them with an “acceptable” and “affordable” employee plan.
The Affordable Care Act forces employers to participate on a greater level than before in the healthcare insurance needs of their employees. For a staffing company, this means needing to make very clear decisions about how the new law will affect them and their customers. The primary impact on agency employment will be the assessment of a per-full-time employee excise tax of $2,000 per FTE/Year unless a health insurance plan meeting certain requirements is offered to at least 95% of qualifying full time employees.
TempWorks suggests the following in terms of best-practices for the light industrial staffing industry with regards to this legislation:
1. It’s probably cheaper for you to offer a compliant health plan to your employees than to pay an excise tax. An excise tax will be charged against all full-time employees, and is not a tax deductible business expense. A qualifying health insurance plan is likely to be cheaper than an excise tax due to its deductibility and the fact that coverage is likely to be waived by a substantial portion of a full-time low-wage workforce.
2. Take advantage of TempWorks’ look-back calculation report. The look-back period is a period of between three and 12 months, as selected by an employer terminating on December 31, 2012. An employer needs to choose a look-back period that results in the lowest number of employees being granted full-time status. This report will give not only the correct look-back period length, but also a list of qualifying full-time employees, seasonal employees, and FTE employees subject to excise tax calculation.
3. Take advantage of TempWorks’ Health Coverage Eligibility report. This dictates which un-enrolled full-time employees are eligible for enrollment at the end of a given plan administrative period, and via email invite them to enroll in the plan via the TempWorks Applicant Center.
4. Take advantage of TempWorks’ DocCenter and ApplicantCenter products, which provide you with a way to communicate the terms of your qualifying health plan to employees, and manage the documentation process of their election or waiver of coverage. The documents entailed in this process will be saved to your TempWorks database for convenient access in case of future audit.
5. Take advantage of TempWorks’ payroll module, which will assess the 9.5% of gross charge to employees via a Cafeteria 125 deduction. Via an employer-paid payroll adjustment, the remainder of that employee's payroll costs will be recorded by week-worked. The consolidated healthcare premium amount for your entire payroll, and the respective employer and employee paid portions thereof will be available via the TempWorks ACA Healthcare Total Cost Report.
6. TempWorks’ accounts payable module also allows the payment of insurance premiums due under your compliant plan, so be sure to check that out, too.
7. And finally, TempWorks can provide you with a per hour cost of coverage for the contingent workforce of each client. We do this via the ACA Healthcare Total Cost Report by Client, which also provides an "ACA Excise Tax" invoice style option which, at your discretion, allows clients to be invoiced for their share of your ACA expense.
These new healthcare regulations are complex, and they are going to dramatically change the staffing marketplace. Every single staffing buying decision made within the next several years is going to be made with ACA compliance in mind. Because of the role staffing companies can play in cheating the system, regulatory oversight is also likely to increase. Firms that can't properly manage this process will be for sale for pennies on the dollar. Companies who used agency employees for only a small fraction of their workforce will increase orders dramatically in the face of having to manage this process themselves.
Being organized in advance is the most important thing you can do this year to gain marketshare and increase profits. This guide is meant to teach the temporary staffing agency how to use its software to reduce to the absolute minimum amount its financial exposure; under the assumption that tax deductible employer-paid healthcare premiums for those employees electing coverage will be far less than non-tax deductible excise tax calculated on the basis of each qualifying full-time equivalent employee.