Introduction
Understanding and complying with the Affordable Care Act (ACA) can be complex for employers, especially when it comes to the monthly employee tracking that is involved. The ongoing effort to track employees' hours can be tedious, but it is necessary in order to determine their full-time status and ultimately those who need to be offered medical coverage. This method of employee tracking is also necessary because the data is used to correctly complete the 1095-C forms at the end of the year.
Setting up ACA Rules within Empeon Workforce streamlines the complex task of employee tracking, allowing customization of monthly tracking to align with measurement, stability, and administrative periods. Once the ACA Rules are set up, Empeon also manages the filing and furnishing of Forms 1094-C and 1095-C at the end of the year.
For more information about the general requirements of this federal mandate prior to setting up ACA Rules within Empeon Workforce, please reference Empeon's article Affordable Care Act FAQ's.
ACA Setup
To set up the company's ACA Rules, navigate to the Benefits section within the Company tab and select the Benefits Administration Card.
Remain on the ACA Setup tab and then click the blue "+ New ACA Setup" button to initiate the configuration of the ACA Rules.
Who to Measure
When configuring the ACA Rules, the first section determines which employees to measure. As indicated in the grey banner along the top of this section, Applicable Large Employers (ALE's) must offer qualified medical coverage to at least their full-time employees. The available measurement options are:
- All employees, regardless of their assigned ACA Type on the Employee Profile.
- Employees with the ACA Type set to Part-Time or unassigned.
- No employees: The system will not measure any employees and at year-end, will only provide 1095’s to those designated as ACA Full-Time in their Employee Profile. The employer must maintain this field for accurate ACA reporting.
An additional toggle is available to measure salaried employees. If hours for salaried employees are being tracked and recorded, enabling this toggle will include them in the measurement. If this is not enabled, all salaried employees will be treated as full-time by default.
Select the Measurement Method
The next section will be to select the measurement method. There are two ways to measure employees:
- Monthly Measurement Method - The employer tracks the hours of service each calendar month for each employee to determine their full-time status for that month. An employee is considered full-time if they average at least 30 hours of service per week or 130 hours per month. If the employee is determined to be full-time, they must be offered coverage for that month. This method can be administratively tedious for employers with several hourly employees with variable hours. It is more suited for employers with primarily salaried or full-time staff.
- Look-Back Measurement Method - This is a more complex way of measuring employees but offers more flexibility for employers with hourly employees working variable hours. Rather than measure employees from month to month, they are measured over an extended period of time of either 6 or 12 months. The Look-Back Measurement Method consists of three defined periods:
- Measurement Period - This is a defined period of either 6 or 12 consecutive months during which the employer tracks hours to determine if the employee averages 30 hours or more per week. The IRS provides employers with the option to select the length of their measurement period; however, it is typically most often 12 months. At the end of this period, if the employee is found to be full-time, they are eligible for benefits during the subsequent Stability Period.
- Administrative Period - A period of up to 60 days during which employers review the results of the Measurement Period and offers coverage to employees who are identified as full-time. This period often aligns with open enrollment. At this time, a new Measurement Period will begin concurrently helping to create a consistent cycle for measuring employees on an ongoing basis.
- Stability Period - This is a defined period after the Measurement Period and Administrative Period during which the employee retains their full-time or part-time status regardless of the number of hours worked during this period of time. This ensures that employees who qualify as full-time during the Measurement Period receive health coverage for the duration of the Stability Period. The Stability Period usually matches the length of the Measurement Period and starts at the same time the coverage effective date is.
For additional insight on the two measurement methods, and examples of how they are structured to track employees, please refer to Empeon's article Affordable Card Act Measurement Methods.
Upon selecting the Look-Back method, the system will prompt for the setup of the Measurement, Administrative, and Stability Period start dates (with the Stability Period length aligning with the Measurement Period). Below is an example of a traditional ongoing Measurement Period:
After setting up an ongoing Measurement Period, the system will prompt for the setup of a new hire Measurement Period. For new hires, employers can select a Measurement Period ranging from 3 to 12 months. If the new hire is determined to be full-time, an Administrative Period of up to 60 days will follow. The subsequent Stability Period must last at least 6 months and can extend up to 12 months, however it cannot be shorter than the Measurement Period. During this time, the employee will transition to the ongoing Measurement Period. Below is an example of how a new hire Measurement Period can be structured.
Please note that setting up the ongoing and new hire Measurement Periods is specific to the Look-Back Measurement Method. These steps will not be applicable for the Monthly Measurement Method.
Affordability Safe Harbors
The next section addresses establishing the medical plan’s affordability safe harbor. Employers have three options to ensure that the employee's cost for the medical plan does not exceed 8.39% of their yearly earnings (as of 2024). Given that most employers don’t know the employee’s total yearly household income, the IRS introduced three Safe Harbor methods for calculating the affordability listed below:
- The employee yearly contribution doesn’t exceed 8.39% of the employee yearly W2 wages.
- The employee yearly contribution doesn’t exceed 8.39% of the employee yearly income based on their hourly rate of pay (the employee’s lowest rate of pay times 130 monthly hours).
- The employee yearly contribution doesn’t exceed 8.39% of the yearly federal poverty line for a single individual for the applicable calendar year.
For assistance in determining which safe harbor to choose, consult with your broker, or reach out to Empeon Customer Support.
In this section, there is also a toggle to Calculate 1095-C line 15 Cost. If multiple plans are offered, the lowest employee cost for self-only coverage should be reported on Line 15 of the 1095-C form, regardless of whether the employee enrolled in the coverage or elected a higher-cost plan. Enabling this setting will calculate Line 15 to be 8.39% (adjusted from 9.5% for 2024) of the employee's income, capping the number at either the plan premium or the calculated amount, ensuring that the figure entered is considered affordable.
Union (Multi-Employer Relief)
For employers with union employees, this section ensures that they are measured and coded correctly on their 1095-C form. However, having union employees does not necessarily require indicating it in this section. It depends on whether the union provides medical coverage to the union employees. If the union provides medical coverage, the respective union code should be entered here. This ensures union employees are coded correctly on their 1095-C form. If the union does not provide medical coverage, there is no need to associate their union code here. These employees should be measured like any other employee.
Offer Settings
This section ensures that all eligible employees are indicated on the 1095-C form as being offered coverage. This setting assumes that an offer of coverage was made, without the employer having to record each offer of coverage, thus treating all eligible employees as being offered coverage to ensure no one is missed. Without this toggle turned on, Empeon Workforce will use the information in the Employee Profile to determine if coverage was offered and indicate that as such on the 1095-C form.
Company Info
This section includes information that will be provided on the 1094-C form filed to the IRS. The 1094-C form acts as a cover letter for the business providing the IRS with relevant company information. In this section, the following fields are prompted:
- Contact Name - This is the business contact name listed on the 1094-C form.
- Phone Number - This is the business phone number that will be listed on both the 1094-C and 1095-C forms.
- Aggregated ALE Group - If there are multiple companies that are applicable toward the ACA requirements, toggle this on and enter the appropriate company codes associated with Empeon.
- Educational Organization - Schools and educational organizations are subjected to special rules pertaining to breaks in service.
ACA Dashboard
After setting up the ACA Rules, Empeon Workforce will measure the employees according to the configuration of these rules. To view and maintain the results of this employee tracking according to the ACA Rules that were set up, navigate to the Benefits section of the Actions tab and select ACA Dashboard.
On this dashboard, Workforce Users will be to confirm in real-time whether the organization is in compliance or not with the employees they have offered coverage to.
There are two factors that can cause this dashboard to show as "Not Compliant": an eligible employee is missing an offer of medical coverage, or the offered medical coverage is deemed not affordable based on the affordability safe harbor established within the ACA Rules.
When the dashboard is indicating that there are employee's missing an offer, it will display the headcount of those employees in both the Offer Summary section as well as each month they were missing the offer. For each month that has employees missing an offer, click within the month to view the employees who need to be offered coverage.
This screen displays the employees missing an offer, with a direct link to their Employee Profile to offer them coverage. When offering coverage, it is important to effective the date the offer accordingly. For example, if the employee was missing an offer for January, February, and March, effective dating the offer for January will solve things for each month.
After attending to the employees who need to be offered coverage, return to the ACA Dashboard and "Recalculate" to update the dashboard.
During the early months of the year, it's common to see many offers marked as non-compliant, especially if the affordability safe harbor for the ACA Rules is set to W2. This is typically due to employees not having worked long enough for their earnings to meet affordability requirements, so it’s not a cause for concern.
For questions relating to the ACA Dashboard, or the ACA Rules that are set up, please don't hesitate to reach out to ACAsupport@empeon.com.