Skip to main content

2019 ACA compliance overview — Employer shared responsibility rules

The Affordable Care Act has made significant changes to group health plans since it was enacted in 2010. Many of these key reforms became effective in 2014 and 2015, including health plan design changes, increased wellness program incentives and employer shared responsibility penalties.



Changes to some ACA requirements, such as increased dollar limits, take effect in 2019 for employers sponsoring group health plans. To prepare for 2019, employers should review upcoming requirements and develop a compliance strategy.



This article provides an overview of the employer shared responsibility rules.




Employer Shared Responsibility Rules


Under the ACA’s employer shared responsibility rules, applicable large employers are required to offer affordable, minimum value health coverage to their full-time employees (and dependent children) or pay a penalty. These employer shared responsibility requirements are also known as the “employer mandate” or “pay or play” rules.



An applicable large employers will be subject to penalties if one or more full-time employees receive a subsidy for purchasing health coverage through an Exchange. An individual may be eligible for an Exchange subsidy either because the ALE:


  • does not offer coverage to that individual; or 

  • offers coverage that is “unaffordable” or does not provide “minimum value.” 





Applicable Large Employer Status


The ACA’s employer shared responsibility rules apply only to ALEs. ALEs are employers with 50 or more full-time employees (including full-time equivalent employees, or FTEs) on business days during the preceding calendar year. Employers determine each year, based on their current number of employees, whether they will be considered an ALE for the following year.


CHECKLIST: Determine your ALE status for 2019



  • Calculate the number of full-time employees for each calendar month in 2018 

  • Calculate the number of FTEs for each calendar month in 2018 by calculating the aggregate number of hours of service (but not more than 120 hours for any employee) for all employees who were not full-time employees for that month and dividing the total hours of service by 120. 

  • Add the number of full-time employees and FTEs (including fractions) calculated above for each month in 2018. Add up these monthly numbers and divide the sum by 12. Disregard fractions. 

  • If your result is 50 or more, you are likely an ALE for 2019. 

  • Keep in mind that there is a special exception for employers with seasonal workers. If your workforce exceeds 50 full-time employees (including FTEs) for 120 days or fewer during the 2018 calendar year, and the employees in excess of 50 who were employed during that time were seasonal workers, you will not be an ALE for 2019. 

  • Companies under common ownership may have to be combined to determine their ALE status. 





Offering coverage to full-time employees


To correctly offer coverage to full-time employees, ALEs must determine which employees are full-time employees under the employer shared responsibility rule definition. A full-time employee is an employee who was employed, on average, at least 30 hours of service per week (or 130 hours of service in a calendar month).



The IRS provided two methods for determining full-time employee status for purposes of offering coverage—the monthly measurement method and the look-back measurement method.




1 - MONTHLY MEASUREMENT METHOD:

Involves a month-to-month analysis where full-time employees are identified based on their hours of service for each month. This method is not based on averaging hours of service over a prior measurement method. Month-to-month measuring may cause practical difficulties for employers that have employees with varying hours or employment schedules, and could result in employees moving in and out of employer coverage on a monthly basis.




2 - LOOK-BACK MEASUREMENT METHOD:

The look-back measurement method is an optional safe harbor method for determining full-time status that can provide greater predictability for determining full-time status. The details of this method are based on whether the employees are ongoing or new and whether new employees are expected to work full time or are variable, seasonal or part time.



This method involves a measurement period for counting hours of service, an administrative period that allows time for enrollment and disenrollment and a stability period when coverage may need to be provided, depending on an employee’s average hours of service during the measurement period.



If an employer meets the requirements of the safe harbor, it will not be liable for penalties for employees who work full time during the stability period, if they did not work full-time hours during the measurement period.




CHECKLIST: Determine your full-time employees



  • Use the monthly measurement method or the look-back measurement method to confirm that health coverage will be offered to all full-time employees (and dependent children). If you have employees with varying hours, the look-back measurement method may be the best fit for you. 

  • To use the look-back measurement method, you will need to select your measurement, administrative and stability periods. 




This summary is a high-level overview of the employer shared responsibility rules. It does not provide an in-depth analysis specific to your organization. If you have any questions or would like to begin talking to an employee benefits consultant, please get in touch by email or by calling (800) 388-1963.

Popular posts from this blog

Innovative employee retention strategies: 9 fresh ideas

Employee engagement and retention are pivotal in every sector, but they carry even more weight in the not-for-profit space, where resources are often limited. High turnover can be both costly and disruptive, impacting productivity and damaging morale. In an era of workforce evolution, to effectively retain their top talent, organizations must explore innovative employee retention strategies that go beyond conventional methods.  Engaged employees are distinguished by their higher productivity, motivation and loyalty, and they are more likely to stay with a company for the long term. Gallup recently updated its research article, The Benefits of Employee Engagement , finding that "low engagement teams typically endure turnover rates that are 18% to 43% higher than highly engaged teams."  In addition to turnover, disengaged employees negatively impact a company's financial health, with turnover costs averaging six to nine months of the departed employee's salary, accordin

Employee benefits strategies: 5 budget-friendly ideas

Retirement and employee benefits help create a solid foundation for recruitment and retention. They’re also pivotal in enhancing job satisfaction, boosting productivity, encouraging employee well-being and increasing workplace morale. With the work landscape evolving rapidly, organizations are revisiting their offerings to develop stronger employee benefits strategies.  The first area most small- and mid-size employers investigate is quick, short-term ways to foster company culture. In this blog, we’ll cover budget-friendly ideas to improve your employee benefits initiatives. Think of them as smaller action items that can help you gain a competitive edge. Then, we’ll take a closer look at how customizing your benefits plan can support your new efforts.  1. Promote a healthy work culture  Investing in employee benefit plans is not just about fulfilling a checklist. It's about creating an environment where employees feel supported in both their professional and personal lives. Benefi

What are Alternative Investments? 4-Part Introduction

The market has seen a lot of uncertainty in recent years. Because of this, many organizations are looking for new ways to diversify their investment portfolios. Our best-kept “not-so-secret” secret: alternative investments. In this blog, we'll explore alternative investments with a focus on how they can potentially shield your portfolios from downside market volatility. In addition, we'll break down its benefits and risks and whether it could be a good fit for you. Part 1: What are alternative investments? Alternative investments may help diversify your investment portfolios through non-traditional investment strategies. Non-traditional investment options have varying liquidity ranges depending on the strategy and fund structure. Alternative investments are sometimes referred to as alternative assets. According to the Harvard Business School , the seven types of alternative investments are: private equity; private debt; hedge funds; real estate; commodities; collectibles; and s