Commentary: Despite all the media coverage of the Affordable Care Act, there is still a fair amount of confusion and misunderstanding about the law, even among employees whose job it is to administer benefits. It’s very possible that the overwhelming amount of communication is what has muddied the waters, but several myths have grown over the last couple years.

These myths could get employers into compliance trouble, and no business wants that. Here are the top five ACA compliance myths that need debunking:

Myth No. 1: I have between 50-99 employees and therefore don’t have to worry about anything under the ACA for 2015. 

Not true. Employers with between 50 and 99 full-time employees, including full-time equivalents might be exempt from pay-or-play penalties in 2015, but it is not automatic – they must qualify for what is called “transition relief.”  

In order to get transition relief for 2015, employers need to have averaged at least 50 but less than 100 full-time employees (including FTEs) in 2014, cannot have reduced the size of their workforce or overall hours of service of their workforce to satisfy ACA restrictions, unless for legitimate business reasons, and cannot have eliminated or materially downgraded the health coverage they offer.

Additionally, other ACA rules will still apply to such employers, such as the prohibition on waiting periods that exceed 90 days.

Myth No. 2: I don’t have to do information reporting because I have between 50 and 99 full-time employees. 

Those same employers with 50 to 99 full-time employees, including FTEs, are required to complete information reporting for the 2015 calendar year, even if they are not subject to pay-or-play.

Myth No. 3: I can break up my business into different, smaller entities and avoid paying any ACA fines or penalties. 

This is not allowed. A “controlled group” analysis under the Internal Revenue Code must be performed to determine if your business entity is subject to the pay-or-play provisions. In other words, if different entities under common ownership or control are considered to be one business entity under the Tax Code, then your business entity could be subject to Pay or Play rules.

Myth No. 4: My plan year starts in July, so I don’t have to worry about those earlier months

Not true. Just because your plan year or renewal year starts later in the 2015 calendar year, that doesn’t mean you’re not subject to penalties for failing to offer coverage (or providing inadequate coverage) for those earlier months in 2015.

If an employer has a plan year that starts later in 2015, it must still qualify for transition relief under the ACA. In order to qualify for this transition relief, the employer must have maintained a non-calendar year plan as of December 27, 2012, the plan year cannot have been modified after that date to begin at a later date, and one of three safe harbor tests must be met.

These safe harbor tests are quite complicated, so it’s smart to discuss your particular situation with a compliance expert.

Myth No. 5: I can designate all of my employees as part-time and avoid a penalty, even if they work more than 30 hours on average per week

No, the mere designation of an employee as “part-time” does not mean that the employee ispart-time under the ACA. If the employee actually performs hours of service for the employer that are on average 30 or more hours per week (130 hours per month), then the employee is considered full-time, and failing to offer such an employee coverage (or adequate coverage) can result in a penalty. As a technical matter, if all employees work less than 30 hours a week, an employer can avoid pay-or-play penalties, but this is not possible for most employers. 

Compliance with the Affordable Care Act has kept many of us hopping the last couple of years. Achieving compliance is not an easy feat. It requires attention to detail at a time when most HR departments are stretched thin, and navigating the information and misinformation that is out there can be a full-time job itself.

Dan Kuperstein is senior vice president of compliance with Corporate Synergies.

Register or login for access to this item and much more

All Employee Benefit News becomes archived within a week of it being published

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access