Affordable Care Act Information

In general terms, the Affordable Care Act is a federal law that requires every American citizen to have a minimum level of health care insurance. Many groups are affected by the law. PowerSchool clients fall under the employer group. The Affordable Care Act requires employers to track health care plans offered to employees and track hours worked by employees to determine an employee's full-time status and eligibility for health care insurance.

Applicable Large Employer (ALE) definition

The ACA employer shared responsibility provisions apply only to Applicable Large Employers (ALEs). An employer is an ALE if it employed an average of at least 50 full-time employees, including full-time equivalent (FTE) employees, during the preceding calendar year.

Full-time equivalent (FTE) employees are calculated by combining the hours of service of all non-full-time employees for the month (capping each employee at 120 hours) and dividing the total by 120. The sum of full-time employees and FTEs for each month of the prior year is divided by 12 (rounding down) to determine ALE status.

Seasonal employee exception: If an employer's workforce exceeds 50 full-time employees (including FTEs) for 120 days or fewer during the year, and the employees in excess of 50 during that period were seasonal workers, the employer is not considered an ALE.

What does my organization need to do?

PowerSchool clients who have substitutes or other part-time employees who average more than 30 hours per week or 130 hours per month and are not offered affordable healthcare need to:

1. Identify these employees.

2. Determine whether to:

   • Provide healthcare

   • Make sure their hours don't average more than 30 hours per week or 130 hours per month

3. Track hours for all employees who are not offered healthcare.

The Importance of Identifying Full-Time Employees

The Affordable Care Act offers options for determining an employee's full-time status.

• Determine eligibility monthly and offer month-by-month health insurance for employees whose hours fluctuate.

• Use a look-back measurement period to determine eligibility.

Play or Pay Penalties

• Section 4980H(a) - Employer must offer coverage to 95% of full-time employees or potentially pay a No Coverage penalty.

• Section 4980H(b) - Employer must offer affordable coverage to full-time employees or potentially pay an Affordability penalty.

Both penalties are triggered by a full-time employee obtaining a premium subsidy from a state health insurance exchange. The law's current definition of a full-time employee is someone who works an average of 30 hours per week or 130 hours per month. Full-time employee status is used only to determine whether the employer owes a Play or Pay penalty. If an employee is offered affordable coverage, their full-time employee status is irrelevant.

Affordability and minimum value

Affordability

Coverage is considered affordable if the employee's required contribution for self-only coverage does not exceed a specified percentage of the employee's household income. Because employers generally do not know an employee's household income, the IRS provides three affordability safe harbors:

The affordability percentage is adjusted annually by the IRS. Refer to current IRS guidance for the applicable year's threshold.

Minimum value

A health plan provides minimum value if the plan covers at least 60% of the total allowed cost of benefits expected to be incurred under the plan. Employers can determine minimum value using the IRS Minimum Value Calculator or by obtaining an actuarial certification.

Affordable Care Act Terminology

Average Hours of Service

Hours of Service

Hours Worked - Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer.

PLUS

Paid Time Off - Each hour for which an employee is paid, or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

Standard Measurement Period Average Hours of Service

Impact of Summer Vacation and Similar Breaks (Educational Organizations Only).

• If an employee is not credited with any hours of service during an employment break of at least four consecutive weeks, e.g. summer break, average weekly hours of service is calculated by either:

  • Ignoring periods of employment break.

  • Crediting hours of service for the period of employment break.

New Employees

Employers will establish an initial measurement period based on an employee's hire date if at that time the employee works variable hours and it cannot be determined whether the employee will meet the requirements for full time status. The initial measurement period can be 3-12 months. This initial measurement period will generally be the same length as the standard measurement period for ongoing employees.

If the new employee qualifies for full time status at the end of the initial measurement period, the employer must offer health care for the initial stability period, which must be the same length as the initial measurement period, or potentially face penalties. The initial stability period is the same length as the employer's standard stability period for this category of ongoing employees.

When these new employees have been employed for an entire standard measurement period, they must also be evaluated for the standard measurement period. If the new employee qualifies for full time status during the standard measurement period, health care must be offered for the standard stability period even if the employee did not qualify during the overlapping initial measurement period. If, on the other hand, the employee does not qualify as full time during the standard measurement period but did qualify during the initial measurement period, health care must continue to be offered through the initial stability period.

For more details about how to handle new employee, refer to IRS Notice 2012 - 58.

Breaks in Service

The Affordable Care Act rules for employees with breaks in service should be reviewed to determine whether employees should be offered health care.

Reporting Requirements

Under section 6056, employers must report the cost of health insurance and provide employees with statements. Electronic filing is required for employers filing 10 or more information returns in the aggregate across all return types, including Forms W-2, 1099, 1094-C, and 1095-C. This threshold applies to virtually all Applicable Large Employers. Electronic filing is done through the IRS ACA Information Returns (AIR) program.