Denver Staffing Agency - ACA FAQs 3 of 8 – Oct. 9, 2013

  • Posted by: J. Kent Gervasini |
  • 10/16/13 |
  • 6:22 AM
Denver Staffing Agency - ACA FAQs 3 of 8 – Oct. 9, 2013

The Affordable Care Act (ACA) imposes major new legal obligations on employers, including new excise taxes, which will increase the cost of supplying temporary and contract workers. The staffing industry is committed to compliance with the ACA, and the American Staffing Association (ASA) is actively working to help staffing firms and clients understand the rules and how they will affect staffing services. These answers to frequently asked questions are designed to help staffing professionals understand the basic ACA requirements and compliance issues.

FAQ 3. Are Staffing Firms Subject To Tax On All Temporary Employees?

No. The ACA provides that employers are subject to pay-or-play taxes only with respect to their “full-time” employees. For this purpose, the ACA defines a full time employee as one who works on average 30 or more hours per week with respect to any month.

IRS & Dept. of Treasury Employer Regulations Allow Employers to Use a "Look-Back Measurement Period" of Up to 12 Consecutive Months
The government recognized that offering health insurance coverage or determining employer tax obligations on a monthly basis would not be feasible for employers with employees who work on a part-time or intermittent basis and whose hours are variable or otherwise uncertain. Therefore, proposed employer regulations published by the U.S. Department of the Treasury and the U.S. Internal Revenue Service on Jan. 2, 2013, allow employers to use a “look-back measurement period” of up to 12 consecutive months to determine an employee’s full-time status for purposes of benefits eligibility. The look-back rules can be used in 2014 and beyond.

Variable-Hour Employees - Staffing Firm Reasonably Expects Employee to Work for Different Clients on Short-Term Assignments
Employers can use the look-back method for both “ongoing” employees, who have worked a full measurement period, and for new “variable-hour” employees. Variable hour employees are those whose work patterns, on their start date, are expected to be of limited and uncertain duration. Examples provided in proposed regulations suggest that employees will be considered variable-hour if, on their start date, the staffing firm reasonably expects that they will work for different clients on short-term assignments (no more than four to five months) with significant gaps between assignments.

Important Note

Assuming an employer chooses a 12-month look-back period, an employee who qualifies as ongoing or variable-hour will have to work at least 1,560 hours over 12 months to be considered full-time.

Great Majority of Staffing Firm Employees Should Qulify as Variable-Hour Employees
Based on the guidance issued to date, the great majority of staffing firm employees should qualify as variable-hour and therefore will be ineligible to enroll in a staffing firm’s health insurance plan. However, employees expected to work full-time for longer periods of time (e.g., information technology and professional employees) likely will be treated as non-variable-hour, in which case benefits will be offered at the time of hire.

American Staffing Association (ASA) Has Proposed That the Government Adopt a Special Rule for Staffing Firms
To help clarify the boundary between variable- and non-variable-hour employees, ASA has proposed that the government adopt a special rule under which employees of firms with unusually high turnover, such as staffing firms, would be presumed to be variable-hour if they are reasonably expected to work full-time for less than six consecutive months.

Source: American Staffing Association, Oct. 9, 2013

The information in the article above is intended for general education purposes only and should not be relied upon as a substitute for professional, legal, accounting, medical and/or insurance advice.

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