Skinny Plan Backfire

Initially Skinny Plans were designed as a strategy to keep Applicable Large Employers with 50 or more full-time employees (or their equivalent) off the strong penalty and avoid costs of offering a Qualified Healthcare Plan (QHP) to their full-time employees. The objective was to offer a barebones coverage plan and only risk the weak penalty if a full-time employee goes to an exchange and qualifies for a subsidy. However, it seems as if this plan may backfire.

According to the newly released summary from the Department of Health and Human Services (HHS) on Wednesday September 25, 2013, premiums on the individual exchange will be 16 percent lower (before tax credits) than previously projected.  For Texas, a 27 year old with an average income of $25,000 could pay as little as $139 (before tax credits) for the lowest Bronze plan QHP. As an employer, this information is crucial to the type of health care plan you decide to offer to your full-time employees. Especially for employers who were betting on a Skinny Plan to keep them away from high penalties.

In any case, dealing with the Affordable Care Act (ACA), all decisions are subject to your particular business. For instance, if your industry has a predominately educated and skilled workforce, then you will have a hard time convincing your full-time employees to pay $120 for a Skinny Plan when a QHP can be purchased on the individual exchange with more coverage for close to the same price. The individual premium could even be less if the employee qualifies for a subsidy.

Qualifies for a subsidy is the trigger. Penalties will begin to largely accumulate for employers that have a majority of full-time employees reject the Skinny Plan offer, go to an exchange to purchase a QHP, and qualify for a subsidy. This is when the plan that was designed to keep an employer away from high penalties backfires.

The cost of offering a QHP may be high, but it could be a better alternative than risking a large amount of your employees qualifying for subsidies on the exchange. However, depending on the size of your workforce and other stipulations, a Skinny Plan may still be an option for your business. To discuss options for your particular business, give us a call and stay updated on the employer mandate by reading our weekly blogs on the ACA.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

I-9 ACTION DUE DATES: Important Dates to add to your calendar when you receive a Notice of Investigation (NOI) from ICE

I-9 ACTION DUE DATES: 
Important Dates to add to your calendar when you receive a Notice of Investigation (NOI)  from ICE

1.  I-9 FORMS:

Section 1: by the end of the employee’s FIRST day of work for pay

Section 2: by the end of the employee’s THIRD day if work for pay

2.  I-9 RETENTION 

3 years from the date of work for pay

-or-

1 year after the employee is terminated

3.  NOI

72 hours

4.  VIOLATIONS

-Procedural and Technical Errors: 10 business days 

-Substantive Errors: no grace period

-No-Match Social Security Letters: 

-Notice of Discrepancy: must send additional documentation within the timeframe on the notice

-Notice of Suspect Documents: Normally gives employer time to demonstrate the employee has work authorization

-Notice of Unauthorized Alien: if employee can not provide documentation, the employee must be terminated immediately

-Notice of Intent to Fine: 

to avoid a final order: 30 Days from the date of the NIF Issuance

Add 5 days to response time if the NIF was sent via the US Postal Service.

If you don’t request a hearing within 30 Days, a Final Order imposing fines will be issued after 45 days.

5.  APPEALS

-Request for Administrative Review: must be filed within 10 days of the Administrative Law Judge’s Final Order

-OCAHO has 30 days from the date of the Final Order to Modify or Vacate the order

-Petition to Review to a US Court of Appeals must be filed 45 days from the final agency order

ICE has identified Mock Audits as a Best Practice.  In following their mandate, we are offering a Mock Audit, free-of-charge or obligation to all of our former, current, and prospective clients.  Send us 10% of your I-9's, which have been RANDOMLY selected (do not send us your best forms, because we need to pinpoint areas of improvement).  Let us help you identify and correct technical, procedural, and substantive errors, so that you can avoid penalties and fines.

Qualified Healthcare Plan

Applicable Large Employers can avoid all possible employer mandate penalties implemented by the Affordable Care Act (ACA) if a Qualified Healthcare Plan (QHP) is offered to all of an employer’s full-time employees. There are three requirements that establish a Qualified Healthcare Plan under the Affordable Care Act. A Qualified Health Plan is defined by Section 4980H of the Internal Revenue Code as a plan that meets minimal essential coverage requirements, minimum value requirements, and is affordable based on the employee’s income.

The following defines each individual requirement:

1.     Minimal Essential Coverage- includes (1) coverage under a specified government sponsored program, (2) coverage under an eligible employer-sponsored plan,

(3) coverage under a health plan offered in the individual market within a State, (4) coverage under a grandfathered health plan, and (5) other health benefits coverage that the Secretary of Health and Human Services recognizes under the ACA.  

2.     Minimum Value- an actuarial value of at least 60%. Actuarial value is the percentage of total costs for covered benefits that a plan will cover.  

Ex: For a plan with an actuarial value of 80%, the employer would be responsible for 20% of the total costs of benefits

3.     Affordability- coverage that is offered at no more than 9.5% of an employee’s household income.

If an employer offers coverage that meets all three requirements of a Qualified Healthcare Plan to all of their full-time employees then the employer will not incur any penalties. However, due to costs and low participation levels some employers may not be able to offer a Qualified Healthcare Plan to their full-time employees. For alternative options or for questions on Qualified Healthcare Plans, give us a call and stay up to date on the Affordable Care Act by reading our weekly posts on the ACA.

THE TOP 10 MISTAKES EMPLOYERS MAKE ON THE NEW I-9 FORM

THE TOP 10 MISTAKES EMPLOYERS MAKE ON THE NEW I9 FORM

The USCIS released a revised I-9 form on May 7, 2013.  Now that the two month grace period has ended, we have identified the top 10 mistakes our clients are making when filling out the new form.  Mistakes or missing information, whether intentional or not, can lead to stiff penalties.

1.  USING THE OLD FORM

You MUST use the NEW form.  The OLD form is one page, while the NEW form is two pages.  If you aren’t sure which form you are using, look at the expiration date on the top right corner of the form.  

Not using the new form can result in substantial penalties.  

2.  USING THE SPANISH FORM

You MUST use the ENGLISH form.  The Spanish form is ONLY valid in Puerto Rico.

However, you may use the form for illustrative purposes - to show Spanish speaking employees where to write their name, date of birth, A#, etc. 

3.  OVER-DOCUMENTATION

Do not accept or request more documents than are necessary.  

The employee must provide EITHER one document from List A - OR- one document from B and one document from C.  Requesting more documents than necessary is considered discrimination, and is prosecutable.

The Office of Special Counsel’s purpose is to identify and prevent employment discrimination against immigrants; this is an obvious example of discrimination, whether it was intentional or not.

4.  ACCEPTING LIMITED SOCIAL SECURITY CARDS

You may accept a limited card, but MUST ask for additional documents from the list.  There are three types of restricted cards: the first states, "NOT VALID FOR EMPLOYMEMT".  The second states, “VALID FOR WORK ONLY WITH INS AUTHORIZATION.”  The third states, “VALID FOR WORK ONLY WITH DHS AUTHORIZATION”

5.  INCOMPLETE SECTION 1

The employee MUST complete Section 1 by the end of his/her FIRST day of work for pay.

6.  FAILING TO LIST EMPLOYEE NAME ON PAGE 2

The new form is now two pages, you MUST write the employee’s name at the top of page 2.  

The reason for this rule is that while some companies use two-sided forms, others use single-sided forms, which may become separated during I-9 audits.  To avoid this obstacle, it is required to place the name on BOTH pages.

7.  LATE ATTESTATIONS

Either the employee has not signed the Attestation in Section 1 by the end of his/her first day of employment -or- the employer has not signed the Attestation in Section 2 by the end of the third business day of employment.  To avoid this problem entirely, make sure you fully process each I-9 on the first day of employment.

8.  LAST VERIFICATIONS

You MUST verify the employee’s employment eligibility within three business days of  the employee’s FIRST day of employment.  To avoid this problem entirely, make sure you fully process each I-9 on the first day of employment.

This policy can cause employers to believe they must wait to process the forms for three business days.  This is NOT the case.  It merely allows the employer extra time to do so.

9.  INCORRECT USE OF DATA FIELDS

You MUST ensure the employee has properly filled out ALL fields correctly in Section 1.  Employees often mistakenly add their date of birth next to the Signature box, rather than the date of hire.  

10.  RE-VERIFICATION ERRORS

When the employee’s Employment Authorization expires, you MUST reverify on the NEW FORM.  You MUST NOT add the re-verification to the old form.  Simply staple the old form to the new one, and reverify in Section 3.  

ICE has identified Mock Audits as a Best Practice.  In following their mandate, we are offering a Mock Audit, free-of-charge or obligation to all of our former, current, and prospective clients.  Send us 10% of your I-9's, which have been RANDOMLY selected (do not send us your best forms, because we need to pinpoint areas of improvement).  Let us help you identify and correct technical, procedural, and substantive errors, so that you can avoid penalties and fines.

Hours of Service

“Section 4980H(c)(4) provides that, for purposes of section 4980H, a full-time employee is an employee who was employed on average at least 30 hours of service per week.”

This section of the Internal Revenue Code (IRS), under the regulations of the employer mandate, specifically uses the word “service” to identify the full-time employee and to calculate their equivalent. Traditionally, employers define a full-time employee as a person who works 40 hours a week. However, the employer mandate is more specific on the number of hours and the type of hours that constitute a full-time employee (or their equivalent).

As defined by Section C. of the Internal Revenue Code, Hours of Service include every hour in which an employee is paid, or entitled to payment for performing duties for the employer. The Code further explains Hours of Service as periods of time when the employer is not performing duties, but is paid or entitled to payment. For instance, Hours of Service include vacation, holidays, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.

The definition provided by the IRS, in accordance with the employer mandate, should be applied to identify your full-time employees and to calculate their equivalent. Correctly determining your full-time employees (or their equivalent) will establish your Applicable Large Employer (ALE) status. Applying the incorrect definition of Hours of Service could activate a domino effect of errors. Those errors include miscalculation of employees and misclassification of your business. This could leave your business at risk of penalties or result in preparing for regulations that may not apply to your business.

Though it is easy to misinterpret the regulations of the employer mandate, it is a mistake that can be avoided if the proper guidance is provided. For more information on Hours of Service or the employer mandate, give us a call or check our website for future posts.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

How to Calculate FTEs Part II

After defining the employer and the full-time equivalent employees (FTE), the final step in defining an ALE is to calculate the total number of full-time employees and their equivalent by adding the total number of FTEs. To simplify, we broke the final step into two posts. In the first post, we discussed how to calculate the total number of FTEs by dividing the total hours of service of employees who are not full-time by 120. In this post, we will review the process of how to add FTEs to full-time employees to decide if your company is an ALE according to the employer mandate.

You may reference the first post on How to Calculate an FTE by clicking this link.  

Remember, a difference exists between a full-time employee and a full-time equivalent (FTE), in this post we are combining the two to determine if your company is an ALE that is regulated by the employer mandate.

The process to determine the total number of full-time employees is laid out in 6 steps under section E. Calculating the Number of FT Employees 4980H of the Internal Revenue Code.

(1)   Calculate the number of full-time employees for each calendar month in the previous year (an employee who provides at least 30 hours of service a week).

(2)   Calculate the number of FTEs for each calendar month of the previous year (see first post).

(3)   Add the number of full-time employees to the number of FTEs.

(4)   Divide the sum by 12. This will result in the average number of full-time employees of the previous calendar year.

(5)   If the result is less than 50, then the employer is not an ALE.

(6)   If the result is 50 or more then the employer is an ALE.

For a mathematical example of how to combine full-time employees with FTEs in determining your ALE status, see this post. If you have any more questions in regard to the above post, please feel free to visit us or give us a phone call.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

How to Calculate FTEs

In our previous blog, we identified the Applicable Large Employer (ALE) in a 3 step process, as defined by the regulations of the employer mandate under the Affordable Care Act (ACA). In the first step, we identified the employer as an employer that employs on average at least 50 full-time employees (or their equivalent). In the second step, we identified the full-time employee or their equivalent (FTE) as an employee who provides on average at least 30 hours of service a week. In this third step, we will discuss how to calculate the number of full-time employees or their equivalent to complete the process of correctly defining an ALE under the employer mandate regulations.

The last step in defining an ALE will be broken up into two posts. In this post, we will calculate the number of full-time equivalents (FTEs) and in a follow-up post we will go through the steps on how to add the total number of full-time equivalents (FTEs) to the total number of full-time employees. Though full-time employees and FTEs sound similar, do not confuse the two. They are not interchangeable. FTEs are employees who do not work full-time that are added together to equal full-time employees. Before you can calculate the total number of full-time employees to determine if your company is an ALE under the employer mandate, first you have to learn to calculate full-time equivalents (FTEs).

Section 4980H of the Internal Revenue code, “that the employer is required to calculate the number of FTEs it employed during the preceding calendar year and count each such FTE as one FT employee for that year.”

The number of FTEs for each calendar month of the preceding year is determined by:

(1) Calculate the aggregate number of hours of service (but not more than 120 hours of service           for an employee) for all employees who were not full-time employees for that month.

                (2) Divide the total hours of service in step (1) by 120.

This will result in the number of FTEs for the calendar month.

For example, if the total hours of service of the employees that do not work full-time equals 1,200 then you should divide the total hours of service by 120. The result will equal the total number of FTEs.

Total hours of service/120= FTEs

1,200/120= 10 FTEs

In this example, the total number of FTEs is 10. Note, this is not the total number of full-time employees only their full-time equivalent. In the next post we will add the next step in determining the total number of full-time employees and their equivalent. If you have any questions concerning this post, please feel free to visit us or give us a call. We will gladly guide you through it personally. 

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

ALE

Under the Affordable Care Act, the employer mandate’s definition of an Applicable Large Employer (ALE) is the difference between an employer that is regulated by the employer mandate and an employer that is not. If the definitions implemented by the Affordable Care Act are not correctly understood, an employer may mistakenly believe the employer mandate regulations do not apply to its business. Conversely, an employer may believe the regulations do apply when they do not.  This is important because if your business is not an ALE, then you are not governed by the employer mandate regulations. Let us help you figure it all out.

The employer mandate’s ALE definition is a single employer that employs 50 or more full-time employees (or their equivalent).

To further define the ALE, apply the following basic steps:

        1. Define the employer.

                2. Define the full-time employee or equivalent (FTE).

                3. Calculate the number of FTEs.

These three steps will lead to the correct definition of what is defined as an ALE by the employer mandate of the Affordable Care Act.

To avoid an overload of complexity, we are only going to discuss the first two steps of defining the ALE. Just know that before you are completely defined as an ALE, you have to calculate the number of FTEs you employ. We will discuss the steps to calculating FTEs in a follow-up post.

An employer as defined under the provisions of 4980H of the Internal Revenue Code, employs on average at least 50 full-time employees (or their equivalent). Under the same provisions, a full-time employee is defined as (the following definition does not apply for tax credit purposes) an employee who provides on average at least 30 hours of service a week.  In combination, these two definitions provide a more elaborate interpretation of the employer mandate’s definition of the ALE. To further define the ALE, we must also discuss how to calculate FTEs. This is the final step in deciding if your business is defined as an ALE under the regulations of the employer mandate. If you have any questions pertaining to the information presented in this blog, please contact us for further clarification.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/