Important Updates for Implementing the Look-Back Rule for Variable Hour Employees
July 26, 2016
The American Staffing Association recently released an Issue Paper on understanding how the look-back rules work in regards to the Affordable Care Act. We thank ASA for allowing us to share this with you, but please consider joining the association if you are not currently a member.
The ASA promotes legal, ethical, and professional practices for the Staffing Industry, and there are many resources available to members. We encourage all Staffing Professionals to become members of the association to take advantage of the many services that ASA provides to the industry.
In this Issue Paper, Senior Counsel Ed Lenz explains how the look-back measurement period came into being, due to the difficulty for many staffing firms to classify employees as full-time. This issue arises from the transient nature of many Staffing Industry employees.
In his paper, Lenz clarifies that in order to use a look-back-period to avoid penalties, an employer must have had a health plan in place for which for which the employee would have been eligible except for the fact that they were in a look-back period. To avoid the so-called “A” penalty, the plan must be at least a basic MEC plan. To avoid the “B” penalty, the plan must qualify as “minimum value” (MVP). Employers with only MEC plans will be subject to the “B” penalty in any month during which an employee worked full-time (i.e., at least 130 hours) and who received a tax subsidy from an ACA healthcare exchange, regardless of their variable hour status.
Lenz points out that most staffing firms offering only basic MEC plans do not use a look-back period to defer the offer of coverage. That’s in part due to the risk that the IRS could later rule that the employees should have been classified as full-time at the start, which could result in an “a” penalty assessment for every employee who worked at least 130 hours in a month. Instead, Lenz advises as follows:
“To avoid “A” penalties, the best practice for staffing firms, in ASA’s view, is to offer at least a basic MEC plan to all new full-time employees either at the time of application, the start of an assignment, or after a short waiting period (e.g., 60 days) after the assignment starts—even if they could be classified as variable-hour employee, subject to a 12-month look-back. In fact, because basic MEC plans are inexpensive, and to avoid tracking hours, some staffing firms simply offer the plan to all new employees even if they are not expected to work full-time hours.” (emphasis added)
In short, this is why Essential StaffCARE clients were advised early on, when the look-back rules and MEC plans were developed, to always offer their MEC coverage to every employee at their time of job application (i.e., when completing I-9 and W-4 paperwork). This strategy was developed to protect employers from the confusion and complexity of the ACA. We called this our “MEC Safety Net Strategy”.
Please take advantage of the information in the ASA Issue Paper, and, if you are not currently a member, we hope you take advantage of the professional knowledge and expertise that the ASA offers.
Please contact your ESC Representative today at (877) 372–2203 or sales@essentialstaffcare.com.
