The Affordable Care Act: Five Ways Restaurants Can Prepare
Ready or not, the Affordable Care Act (ACA) is fast approaching and it’s going to impact the food service industry in a big way. Starting January 1, 2015, large employers, or organizations with more than 100 full-time equivalent employees (who do not opt into Transition Relief) will be required, under the ACA’s Employer Mandate, to […]
Ready or not, the Affordable Care Act (ACA) is fast approaching and it’s going to impact the food service industry in a big way.
Starting January 1, 2015, large employers, or organizations with more than 100 full-time equivalent employees (who do not opt into Transition Relief) will be required, under the ACA’s Employer Mandate, to offer health care coverage options to 70% of its full-time employees.
In 2016, large employers with more than 50 but fewer than 100 employees will be required to offer health care coverage options. Small businesses with fewer than 25 FTEs will be eligible for tax credits. Restaurants that don’t participate will have to pay a fine.
Not surprisingly, the ACA is a hot topic on the minds of many owners and operators and will likely stay that way for years to come. Here are five ways you can prepare your restaurant operation to be ACA-compliant.
1. Calculate Full-Time Equivalents
Why this is important: The number of full-time equivalents will determine the date you are required to offer health care to those who meet the criteria.
Calculating FTEs is a little more complicated than just tallying up your full-time employees. Here’s how you calculate it:
Get a list of all employees, both full-time and part-time; exclude seasonal employees
Count the hours worked per week for each full-time employee
Calculate the number of hours worked per week by non-full time employees, divide by 30 and add it the number from the previous bullet point.
Here’s an example: Mike owns a business with 20 employees. He has:
15 employees working an average of 40 hours per week
2 employees working an average of 15 hours per week
1 employee working an average of 25 hours per week
2 employees working an average of 27 hours per week
Here’s how Mike calculates his FTEs:
Number of full-time employees = 15
Non full-time employee hours (15+15+25+27+27)÷30 = 3.6 or 3 FTEs (always round down when calculating FTEs)
Mike has 18 FTEs
2. Agree on Fundamentals
Why this is important:* *Consistency is key is keeping all ACA variables in check – whether it’s one location or several.
The ACA institutes some very specific (albeit complex) rules. What it doesn’t do however is tell employers how to handle the ACA within their individual business operations.
That’s where restaurants need to agree on their own set of guidelines and/or governance rules. Many businesses – especially larger food service operators with many locations – will need to determine things like:
Who will administrate? Will it be the store manager, regional management, corporate office or someone else?
How will you track individual schedules? How will you track part-time, full-time or variable hour employees?
What will be your look-back period?
Will the stability, measurement and administrative periods be three months, six months or a year?
What other processes need to happen to ensure IRS reporting is accurate?
3. Choose a System or Software
Why this is important:* *Never before has the industry had to track such complex information regarding its employees and then accurately report it to the government.
An employees’ ACA status is entirely dependent on their schedule. For example, if an employee is hired as part-time, managers must ensure their hours reflect that status.
Add look-back, measurement, stability or admin periods, new hires, turnover and overtime, and your eyes start crossing. Keeping up with data like that is going to be difficult for restaurants that don’t have a system in place. It would be like doing your taxes without software or receipts. No trail and Uncle Sam is after you.
Whether you’re one store or sixteen, owners and operators will be looking to technology vendors to solve their ACA challenges and prevent overscheduling part-time employees.
4. Start Collecting Data
Why this is important: Restaurants should start tracking their employees’ schedules now, to establish an accurate look-back period.
The good news is that in an effort to give employers more time to collect information, the Obama Administration postponed the mandatory reporting of employee healthcare benefits, moving the start date from January 2014 to January 2015. They also instituted some Transition Relief rules, which you can read in “Section 34 on the IRS Website”:http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act.
The bad news: even with the extra time, some operators aren’t prepared.
The ACA mandates that employers have either three-months, six-months or a year’s worth of historical scheduling data to set a correct status of full-time or part-time, which will determine who is offered health care in January 2015 or 2016.
5. Schedule According to Status
Why this is important:* *Under the ACA, a full-time employee is someone who works 30-hours per week on average, which is a change for operators used to the 40-hours per week full-time employee credential.
In preparation for the ACA, food service operators would be smart to begin accurately scheduling part-time and full-time employees to get them used to working different hours. They should also keep a running tally of their employees’ scheduled hours worked vs. actual hours worked.
While the ACA only cares about actual hours worked, it’s good business to know when people are scheduled vs. when they actually worked.
Let’s be real, that was a lot of info. Here’s the gist of what you need to do:
Determine your business size by calculating the number of full-time equivalents across your operation.
Set up formal or informal (depending on your size) Affordable Care Act governance or guidelines.
Choose a system or software to help you track and manage ACA status and scheduling, which can keep people working within their allowable limits.
Start tracking schedules NOW.
Schedule people according to their allowable hours. Look for systems that will notify you when someone is going over their allowable hours for their ACA status.
The materials and information included in this article are provided for reference purposes only. They are not intended either as a substitute for professional advice or judgment or to provide legal or other advice with respect to particular circumstances.
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