The Affordable Care Act and What It Means To Your Business—Nondiscrimination Rules

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While BWSI is primarily a software and services company that only deals with software solutions in the staffing industry, we also do a great deal of business consulting when working with our clients and prospects.  One of the things that we have consistently seen in working with staffing agencies that offer benefits to their contingent workforce (or ‘temps’ if you will) is the existence of a two-tier plan.  This means that one tier of benefits, usually a more generous and rich plan, is offered to an agency’s internal employees such as recruiters and sales professionals and a different tier at a usually lower benefit (and employer contribution level) is offered to the contingent employees.  With the passage of the Patient Protection and Affordable Care Act, all insured group plans will be subject to nondiscrimination tests similar to self-insured plans which would quite probably put an end to the two-tier benefit model.

In order to pass the nondiscrimination tests, you will need to meet two requirements:

  1. Your health plan cannot discriminate in favor of highly compensated individuals in regards to their eligibility to participate in the plan.  To put it simply, this means that the plan must demonstrate that it benefits at least 70% of all eligible employees.
  2. Your health plan cannot discriminate in favor of participants who are highly compensated as to the benefits provided—i.e. you must offer the same benefits to both highly compensated and non-highly compensated employees.  This also means that differences in plan features such as employer contribution levels, copays, deductibles, and waiting periods are not acceptable.

Obviously, item #2 is where most staffing agencies that offer benefits will have an issue.  Quite simply, I can’t recall a staffing agency that BWSI has worked with that offered benefits to its contingent workforce and didn’t have this situation.  As of this writing, enforcement of the nondiscrimination testing has been delayed as the IRS hasn’t issued guidelines, but that is expected to be forthcoming soon.  Many things regarding testing guidelines have been bandied about, but some of the things that BWSI hopes are in the testing guidelines include:

  • Employer contributions not tested as ‘benefits’
  • Testing based on availability/offer of coverage and NOT participation—i.e. if all participants have access to all plan options, it would not be discriminatory if said participants don’t elect the coverage.
  • Certain employees should be excludable from testing guidelines such as those under 25 (can still be covered on their parents plan), part-time & seasonal employees, and those employees that are covered by another plan for example.

There is a great deal of lobbying and posturing going on in Washington D.C. over these guidelines, so it is imperative that you stay abreast of possible changes and issues as it affects your business.  Just to illustrate how serious the nondiscrimination tests are, if you fail them, you can be fined $100 per day excise tax per affected employee!  For a staffing agency of modest size, this can quickly add up to some serious money, much less those paying several hundred employees per week.  It is also important to note that the nondiscrimination failure penalties are separate and in addition to any penalties for failing to offer affordable coverage.

It is BWSI’s opinion that this part of the legislation will have a significant impact on all staffing agencies, particularly those that offer the two-tier benefits plan.  At a minimum, business will have to come up with other creative ways to compensate their employees outside of their benefit plan provisions.

 

Dress it up—the ins and outs of a dress code policy

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As one of the leading developers of staffing software, I have been fortunate to travel all over the country (actually, I am only missing two states to cap all 50 including Puerto Rico) meeting with clients and prospects.  I have seen everything from very formal to borderline ballpark casual and often get questions about how to write and enforce a dress code or appearance policy.  If you were to ever pop-in unannounced at BWSI’s offices, you would probably find that this question, directed at me in particular, is somewhat laughable since I have the terms ‘dress jeans’ and ‘good flip-flops’ in my vernacular.  That being said, you can legally implement and enforce an appearance policy with several caveats.

  • Discrimination Issues:  Your policy should be as gender-neutral and allow for as much reasonable accommodation for religious reasons as is prudent.  There are circumstances, albeit limited, where an employee can claim religious reasons for a particular type of dress or garb.  BWSI highly recommends that if this situation arises and you are uncomfortable for making such accommodations that you consult qualified counsel for guidance.  One should note that piercings and tattoos are not generally afforded protection as a religious reason.
  • Written Policy:  You should have a clearly and carefully written policy for your dress code/appearance policy.  It should in no way be subjective or inconsistent, but firmly based on business decisions/safety reasons for said policy.  It shouldn’t be an exhaustive list of what an employee can and cannot wear, although you can prohibit certain articles of clothing (tank tops or jeans for example).  By including certain articles of clothing that are prohibited (such as jeans), you eliminate any subjectivity as to whether an employee’s clothing is professional enough or projecting the image you want to project.
  • Acknowledgement: You can choose to have an employee sign-off on the dress code/appearance policy as part of their onboarding process.  A common way I have seen this done is to include it in the employee handbook, which usually has an acknowledgement/acceptance sign-off associated with its receipt.
  • Training:  This is one item where you can invite trouble.  All staff responsible for enforcing the dress code/appearance policy should have some directed training above and beyond simply going over the policy.  Improperly trained/untrained staff could be placed in a situation to make a poor or uninformed decision in situations related to gender or religious issues as it relates to the appearance policy.
  • Be Consistent:  Uniform enforcement of the policy is key to keeping your appearance policy within legal boundaries.  Ensure that what applies to one employee applies to all as far as your appearance policy and its enforcement are concerned.

Based on BWSI’s experience, staffing agencies that have a defined dress code/personal appearance policy for both their internal staff and contingent employees project a much more professional appearance.  It is important to realize that with your contingent employees, they are the public face of your business as they go out on assignment.  You do not have to tolerate an unprofessional appearance, but there are certain legal guidelines that one should be aware of.

The Affordable Care Act and What It Means To Your Business–Full Time Employees

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As a provider of software solutions for the staffing industry, we have been following developments of the Affordable Care Act since it was passed.  One of the key components of the law is how to define a full-time employee for purposes of determining whether an affordable healthcare plan must be offered to the employee or penalties paid.  On 2/9/2012, the Department of Labor released a document/FAQ describing the multi-factor test that they as well as the Internal Revenue Service and the Department of the Treasury are considering in determining who is full-time.  There are two separate components to this this test depending on whether the individual is currently employed or whether the individual is a newly hired employee.

For current employees as of January 1, 2014, employers can choose a look-back period of up to 12 months to determine if an employee worked full time (currently defined as 130 hours per month).  If an employee is deemed full time under this definition, you must either offer an affordable (more on the definition of affordable in a later post) insurance plan OR pay penalties as outlined in BWSI’s previous post here.  Once an employee is deemed to be full time, this would carry over for the following 12 month stability period as long as they remain employed.  It is still to be determined if there will be any minimum number of hours that must be worked monthly to maintain the full time status during the 12 month stability period and many business advocacy organizations are pressing for this to be the case.  The American Staffing Association is arguing that there should be at least a 35 hour per month minimum that must be worked during the stability period to maintain the full time status of the employee.  Of course, given the nature of staffing and many employees going from assignment to assignment, there is no clear cut definition in the law of what “employed” means.

The definition of full time for newly hired employees is somewhat more opaque in my opinion.  If, at the time of hire, an employer can “reasonably determine” that the employee will work full time on an annual basis AND the employee works full time in the first three months of employment, you must offer an affordable plan or pay penalties at the end of the three month period.  Now for the fun part….If you can’t reasonably determine that a newly hired employee will work full time, then if the employee works full time in the first three months and you “reasonably believe” those hours are representative, you must offer an affordable plan or pay penalties.  If the hours in the first three months (say in a seasonal retail position for example) are unrepresentative, then you get three more months to determine the employee’s full time status.  So, what if after six months that an employee is working full time you don’t consider the hours representative?  Currently, there is no guidance on this point and further clarification is needed (the list of points that need clarification sometimes seem to be even longer than the law itself!)

With either current or newly hired full time employees, the law allows for a maximum waiting period of 90 days before you have to offer an affordable plan; however, you can set eligibility rules that exclude certain classes of employees based on job classifications (which, of course, must be “reasonable”).  At such time, the employer will probably have 31 days after the applicable look-back period to offer/enroll the full time employee in an affordable plan (another one of those points needing final clarification).

If you are a staffing service reading this, you probably have a slew of questions such as ‘what if the employee is between assignments, when does the testing clock reset?’ or ‘what if an employee enrolls in a plan, but stops working full time?’.  At this point, we don’t know and the details are still being hashed out with guidance to be forthcoming.  To add even more variables to the equation, the U.S. Supreme Court ruling on the healthcare law could drastically affect how the law is implemented and what, if any provisions will be intact, struck down, or modified due to this ruling.  In our next post, BWSI will cover an issue that will be near and dear to many of our clients—the non-discrimination rules on the plans you offer (e.g. the two-tier plans where your in-house employees are offered one plan and your contingent workforce offered a different plan).