Essential StaffCARE “Safety Net” Helps Staffing Companies Avoid Giant ACA Landmine Due to Employee Re-Classifications

Smart staffing companies are listening to Essential StaffCARE before making their final ACA decisions.

Three years ago, when MEC plans first arrived on the scene, Essential StaffCARE was the first to recommend offering this plan to ALL employees and job applicants for added protection, not just full-time calculated employees.

We called this our “Safety Net” strategy. In 2013, we described in detail how this strategy would protect staffing companies from potential repercussions stemming from accidental employee misclassification or reclassification, including the gray area associated with the Variable Hour rule and determining Full Time status.

Today, our clients are thanking us for recommending this Safety Net strategy early on. It provides greater protection against retroactively triggering the nuclear “A” Tax ($2,000 tax per full time employee), which has the potential to put some companies out of business.

Other MEC providers were not as forward thinking, which is causing concern among some staffing companies today, now that ACA is shifting from implementation to enforcement. When the IRS starts auditing staffing companies over ACA compliance, many companies will wish they had this important Safety Net.

WHY YOU NEED ALL EMPLOYEES AND JOB APPLICANTS (REGARDLESS OF THEIR INITIAL JOB CLASSIFICATION) TO COMPLETE THE ESC ENROLLMENT FORM AND EITHER ACCEPT OR DECLINE COVERAGE !!!

Issue:

  • Staffing Company with 300 full-time employees based on look-back rule.
  • Only offers ACA compliant coverage to 285 (95% of 300) temps thought to be full-time
  • IRS audit identifies 20 employees who are re-classified as full-time status, due to their hours worked.
  • Now there are really 320 full-time employees, not 300.
  • MEC plan was offered to 300, not 320, due to re-classification of 20 employees.
  • 300/320 = 93% Offer Rate (below 95% threshold)

Result:

  • Staffing Company fails to meet the 95% offer threshold, and is treated under ACA rules as if they did not offer any ACA coverage at all.
  • This triggers the $2,000 A-Tax under section 4980(h) on all 320 Full Time employees.
  • Penalty = $2,000 x 320 = $640,000 tax penalty
  • ESC provides the lowest employer cost ACA solution combined with the highest level of compliance certainty

Contact us today for more information. We provide the insight and experience to keep your company ahead of the curve and reduce your risk. Please contact your ESC Representative today at (877) 372–2203 or sales@essentialstaffcare.com.

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