You have a business and it is growing – Congratulations!
As your company grows and you hire more employees, there are milestones that you will hit. Some of these milestones come with additional responsibilities that you need to attend to, such as Cobra, HCSO, FMLA, Sexual Harassment Prevention Training and the Affordability Care Act’s Large Employer Mandate.
For example, if you are a company based in California and offer an employee benefits plan that includes medical insurance, you are obligated to allow former or terminated employees and their enrolled dependents to enroll in Cal-COBRA if they are no longer eligible to be enrolled in your plan. Once you reach 20 employees or more for an average of 50% or more of the previous calendar year, then you are obligated to start offering enrollment in Federal COBRA for those plan participants and enrolled dependents if they are no longer eligible to be enrolled in your plan.
Additionally, if you have any employees working in the City of San Francisco, you would also need to comply with the Health Care Security Ordinance (HCSO). However, these two things would not happen at the same time because while they both require you have 20 or more employees before you have to comply, they count those employees differently, and over a different length of time.
Federal COBRA counts employees by their classification. A full-time employee is counted as 1, and part-time employees are counted in fractions. So you may have 15 full-time employees, and 5 part time employees and you would NOT be subject to Federal COBRA because your part time employees work an average of 20 hours per week, meaning all together they only count as 2.5 full-time equivalents which when combined with your full-time employees puts your count at 17.5.
The HCSO counts employees by head count, and they do it per quarter. So if you have 19 employees during one quarter of the year, you don’t need to comply. But if you have 20 employees for at least 13 weeks of the following quarter, you would need to comply.
Is your head spinning yet?
As you move further along and you reach 50 employees, there are more regulations that may now be applied to your company. They are the Family Medical Leave Act (FMLA), Sexual Harassment Prevention Training for California businesses, and the Pay or Play provision of the Affordable Care Act. As one might expect, each regulation counts employees in a different way.
When you have had 50 or more employees over 20 weeks during the current or previous calendar year, you are subject to FMLA. The weeks do not have to be consecutive weeks. Additionally, FMLA counts the employees on your payroll register even if they are not being paid. If they are on your payroll register, they are counted. Each person is counted as 1, regardless of the number of hours worked.
For sexual harassment prevention training in California, once you have 50 or more employees (regardless of full-time or part time status) for 20 or more consecutive weeks, you have to begin offering training for your management staff every 2 years, and within 6 months of promoting an employee to a managerial position.
The Applicable Large Employer or ALE classification under the Affordable Care Act counts employees in yet a different way. With regards to determining ALE status, you generally count each full-time employee as 1, and for part-time, seasonal, and variable-hour employees you count the number of hours they all worked collectively during a month (do not include more than 120 hours for any employee), then divide the total hours by 120 hours to get how many Full-Time Equivalent Employees (FTEs) you have. You then add the number of full-time employees, to your FTE’s to get your total employee count. If you average 50 or more employees during the calendar year, you are considered an ALE the following tax year. For example, if you average 50 or more employees during the 2018 calendar year, you would be subject to the Pay or Play Mandate and the reporting requirements associated with it for the year 2019.
If your employee count stays at 50 or above in 2019, you would continue to be an ALE with all associated requirements in 2020. If your employee count dips below 50 in 2019, then you would not be considered an ALE in the year 2020.
The Pay or Play Mandate (Employer shared responsibility) means that as an ALE you are required to offer minimum value, affordable coverage to your full-time employees and their dependent children, or potentially face a penalty from the IRS.
No one is an expert in all things, which is likely why your business is doing well and thriving: because you fulfill a need or expertise in the area that you specialize in. As a successful business owner you know it is advantageous to have strong partners in your corner to help lend their strengths to your areas of weakness.
Having a strong benefits advisor to assist you in navigating these hurdles, speed bumps, and curves in the road is essential. Whether you have the resources to handle these regulations in-house, or if you need someone to recommend a trustworthy third party vendor to handle it for you, we are pleased to be able to fulfill that need for you.
by Elizabeth Kay