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Affordable Care Act is the topic of this Remote Quality Bookkeeping Informative Podcast. Adam Rondeau is your podcast host with Jacob Stebbins, ADP Client Channel Specialist and Mark Kilduff, founder of Remote Quality Bookkeeping. as guests.
The Affordable Care Act is based your FTE employees. This podcast will tell you how to calculate your FTE to determine if the Affordable Care Act applies to your business. You will also learn what you need to do to comply with the Affordable Care Act.
Affordable Care Act: How to Calculate FTE
Hello. Welcome again to another episode of the Remote Quality Bookkeeping online web based series. I’m again joined by Jacob Stebbins, a client specialist with ADP, as well as Mark Kilduff, the CEO of Remote Quality Bookkeeping. Guys, how are you?
Hello. We are, today, going to discuss the Affordable Care Act and of course answer the age-old question, does it apply to me as a business owner? Jacob is of course what we’re going to call our expert on this topic. Jacob, if I’m a business owner, how do I know that this applies to me?
It’s a little bit of math that everybody’s going to have to do but I’ll try and keep it as simple as humanly possible. What I want people to do is stop thinking about the number of employees that they actually have and I want them just to stop thinking about the number of hours that people work in a given week. Because the Affordable Care Act isn’t actually done by “the number of real employees”, it’s done by how many full time equivalent you have, the FTE.
Long story short, they think every time you have somebody that works over 30 hours, they’re a full time equivalent whether you are offering them health insurance or not. Basically, what you’re going to do, you’re going to take the total amount of hours that everybody works in a week and divide it by 30. Or if you prefer, and probably what I would suggest because it’s a little bit more accurate, is you would take the total number of hours worked by your company in a given month and divide it by 130.
That will give you the number of full time equivalent employees that you have regardless of you actual employees. That number, when you get that total number of hours and you divide it by 130, if that number is under 50, then you do not have to worry about the Affordable Care Act. If that number is over 50, then you are applicable and you are going to have to deal with the filings and the rules, etc.
All the fun stuff, you’re saying. Some of those rules, what are the important ones that we need to know then, as a business that has over 50?
Basically, what you’re going to have to be doing, for these employers over 50, is they’re going to be tracking on a yearly basis … There’s a couple forms called the 1094 and the 1095C. I’ll get yelled at for saying this, but in layman’s term, they’re basically a W2 and W3 specifically about health insurance.
Every employee gets one and the business has to do one themselves, basically summarizing the health insurance that’s provided and given to the employees. There’s a ton of different tests that they have to be doing. That’s a different conversation for people that it applies to. Long story short, you got some extra forms you got to file and you got some extra work that you need to do.
I’m assuming that’s also accompanied by extra fees?
Absolutely. It all is.
Why wouldn’t it be? You got to give it to them. What about a seasonal business, let’s say? Because you got to figure that there’s a lot of work time and hours put into those businesses because again, they only got a short range of time to make their money. They’ve got a ton of hours being worked. How does this affect them?
What you’re going to do is you’re going to look and you need to have that over 50 in those six months that you’re working. If you’re over 50 during those six months or more … Some seasonal businesses are nine months and some are ten. If you’re over that qualification for six months of the year, then you qualify regardless if you’re seasonal or not.
But it’s just that six month mark? If you’re over that 50 within six months?
Correct. Six months of the year. That’s why I suggest the monthly calculation because it makes it nice and easy. They can just say, “Hey, over the last six months, let’s do my monthly calculation, let’s see how many of them I hit.”
In a nutshell, if out of six months, three of them came in at 48 employees and three months came in at 52 employees, by doing it the average way, I’d come in at 50 people, is that correct?
You need to do it month by month. It’s going to make it easier for you to do a month by month because it’s not a average. What they want is they actually want how many months of the year are you over that. If it’s six or more, then time to do some filings.
The tricky thing is six months consecutive, that makes you eligible.
No, it’s not consecutive Mark, if at all. You could be in business for nine months and you could be …
In the seasonal person, he’s only working six months.
Then it won’t apply if only three of them are over and three of them are not, then they’re all set?
Correct. Those people need to start thinking about it anyways because they’re toeing the line and you might as well see what it looks like on that end to get it done properly than anything.
You want to be on the bad side of the feds anyways.
You never want to go to the IRS and the feds and say, “I found a loophole.” That’s not a good thing to say.
They’ll have that closed down real quick and you’re going to be on some type of fun investigation.
Are there options for companies? Can they offer multiple policies that allow maybe to help reduce the price or at least the paperwork that I can only imagine a company as this, is there any way around that?
Honestly, the cost of health insurance is a conversation to have anyways. We’re in Massachusetts, we’re lucky enough to have an over saturation in the market. That’s not the case for everybody. It’s a costly expense. There are a lot of people that are now offering multiple plans, they’ll offer a middle tier plan that they’ll base their 50% contribution off of.
What they’ll do is they’ll say, “Hey, we’re going to contribute 50% of this middle plan. Now, we’re going to offer a lower, cheaper high deductible health plan,” maybe for the guys that don’t use health insurance that much. The only time they’re going to go to a doctor is if they get their leg cut off or something. We all know those guys out there that never go to see a doctor. They’ll offer the high deductible health plan that’ll be cheaper and they’ll contribute the same amount. At the same time, it’s better for them because it costs the employee less.
There’s the other direction where they’ll offer a Cadillac plan as well where maybe I have a high health user or I’m about to have a child where I can upgrade your higher health plan that’s going to offer me lower deductibles in co-pays and cover more. But the increase in cost is eaten by the employee because you’re still basing your contribution off that middle tier plan.
Regardless of the plan amount, it’s 50% across the board?
That’s quite a lot of options. Those would all apply to the seasonal business as well?
Yeah. Listen, it gets into the weeds. A lot of people offer one plan. I have clients that are like a seasonal restaurant that they have 150 employees, technically they qualify for the ACA. They only actually have let’s call like eight full timers, which are the managers and the chef. They’re only offering it to these people and they’re not even taking it. They’re doing these filings and as long as they’re offering the health, it doesn’t necessarily mean that the employee has to accept it. As long as they offer an affordable plan, they’re doing their due diligence on the business owner’s side.
Right, because that’s the only requirement, correct? A company of X amount of employees is required to offer but you, as an employee, you’re not required to take it?
Correct, exactly. There’s an affordability metric based upon what the cost of the plan has to be. I can always go into detail with other people because it’s all different to everybody. The people that are really seeing the worst offer, there’s other people, like you said, on that border who are like, “Should I have to do it? Do I not have to do it?” Because the people that now realize they have to, the increase and just back office paperwork that it takes to do this is a lot.
It makes me happy that I’m not a business owner right now, I got to say. I got the right career to go into. Mark, if you won’t have any other questions, I think that basically sums up the big points. If there’s any further information needed, Jacob, is there where the people can contact you?
Absolutely. I’m on LinkedIn, Jacob Stebbins, ADP client specialist. My cell is always available, 617-593-2629, or you can shoot me an email at Jacob.Stebbins@ADP.com. Happy to answer any questions. If I can’t get the answer or I don’t have it, I can at least point you in the direction where you can find it.
There you go. For all your accounting needs, as always, Mark Kilduff, that’s at MyRQB.com, which you’ll be able to find this and many other podcasts so make sure you check those out. Stay tuned because we’re going to have more episodes coming. Jacob, Mark, thank you very much.
All right, thank you.