The ACA in 2015 – Where Are School Districts Now?
Senior Compliance Attorney
The beginning of 2015 marks the first year of shared responsibility implementation for large employers under the requirements of the Affordable Care Act (ACA). This is a good time to review the status of specific provisions of the law which are important to school districts.
Identifying 30+ Hour Employees
The ACA shared responsibility provisions require employers to provide affordable, valuable coverage to full-time employees or subject themselves to certain penalties. The law currently defines “full-time” as any employee who works an average of 30 or more hours per week. In order to identify eligible employees, employers are required to use one of two different counting methods: the look back measurement method or the monthly measurement method.
For multiple reasons, a majority of districts have chosen to leverage the look back measurement method as opposed to the monthly measurement method (MMM). Analysis done for districts has shown that the MMM requires employers to “measure” each employee’s hours on a month-by-month basis which could increase administrative time and effort.
The look back measurement method requires the employer to designate a 3-12 month time period during which the employer averages the employee’s hours. This period is followed by a stability period, which in essence “locks” a 30+ hour employee in for a period of time at least as long as the measurement period. Districts also have the option of including an administrative period which can be used to generate the 30+ hour list, make offers of coverage and enroll eligible individuals.
- May 1, 2014 – April 30, 2015 Measurement Period
- May 1, 2015 – June 30, 2015 Administrative Period
- July 1, 2015 – June 30, 2016 Stability Period
Section 105(h) Non-Discrimination Rules: Fully Insured
The ACA included a provision (Section 2716) which prohibits discrimination in favor of highly compensated individuals in insured group health plans. On December 23, 2010, the Internal Revenue Service (IRS) issued Notice 2011-1 stating that fully insured plans will need to satisfy “rules similarly to the rules” applicable to self-funded health plans contained in Internal Revenue Code (IRC) 105(h). However, compliance with these requirements is not required until regulations or guidance is issued. It is also anticipated that the guidance will not apply until plan years beginning after a certain period following issuance.
This means that fully insured plans will not be subject to the non-discrimination requirements until guidance is issued. To date, no guidance has been issued and there has been no indication of when such rules will be issued. Once the guidance is issued, it has been suggested that plans will have time to allow for compliance during their next renewal period.
Temporary Staffing Agencies
One of the challenges that many districts face is how to administer substitute teachers. One potential solution has been for districts to contract with temporary staffing agencies, which then provide substitute teacher personnel. Although this may be an attractive option, districts should be aware of the rules as they apply when utilizing these entities.
It is important to note that the law uses a common-law test to identify if a person is actually an employee of the employer. Essentially, if the employer can direct the employee in his/her day to day duties, the employer will be considered the employer for shared responsibility purposes. However, the final regulations include a provision specific to staffing firms. An offer of coverage made by the staffing firm on behalf of the “client” (employer) will be treated as an offer of coverage made by the client/employer if certain conditions are met.
Any district that utilizes staffing agencies could rely on the staffing agency’s offer of coverage if the fee the district would pay to the staffing firm for an employee enrolled in health coverage under the agency’s plan is higher than the fee the district would pay for the same employee if the employee did not enroll in the agency’s health coverage.
Districts should check with the staffing agencies to ensure that they are offering coverage to eligible individuals and that the fee for enrolled individuals is higher in order to satisfy the district’s offer of coverage to these substitutes. Careful attention should be paid to the contracts to ensure compliance.
Rules Specific to Educational Institutions
The shared responsibility final regulations include certain provisions specific to educational institutions, such as school districts. Here are a few rules to be aware of:
Employment Break Periods
Employment break periods are specific to educational institutions and require that employment break periods longer than 4 consecutive weeks are not counted against the employee when averaging hours. The rules operate on an employee-by-employee basis, and do not require an institution-wide break period.
The re-hire rules state that an employee with a break of service longer than 26 weeks or a break in service longer than the actual period of employment can be treated as a new employee. These rules can be applied to all returning employees, regardless of their status when they stopped working.
Application of the Rules
The practical application of these rules can be quite confusing. Generally speaking educational employers would first look to see if the sporadic employee (e.g., substitute teacher) could be treated as a rehire. Here are some scenarios for the rules to be applied:
- If the employee did not have any hours of service for 26 weeks OR did not have any hours of service for longer than the previous employment period (e.g., worked for 4 weeks, but had no hours of service for 6 weeks) then upon that employee’s return, the employer would treat that employee as either a new full-time or variable hour employee.
- If the returning employee will be working 30 or more hours per week, the employer would be required to offer coverage within the first three months to avoid a penalty.
- If the employee returns as a variable hour employee, the employer could assign an initial measurement period for that employee of up to 12 months.
- If, however, the employee cannot be treated as “new” under the rehire rules, the employment break period rules would apply.
Unfortunately, the regulations are not all that clear on these points and determining what to do with substitute teachers or other similar employees can be complicated and may cause you to seek counsel from an attorney or insurance professional.
All districts should have an overall plan to handle the new challenges offered to them by the implementation of the Affordable Care Act. If you don’t you should contact your attorney or insurance professional to put one in place.