How the Affordable Care Act Affects Payroll



The Affordable Care Act (ACA) can feel like something of a minefield for payroll administrators and employee benefits policymakers. To ensure payroll compliance according to the ACA, here are some payroll areas affected by the act that you need to know.

What Is the ACA?

The Affordable Care Act is often referred to as Obamacare, as it was introduced under the presidency of Barack Obama in 2010. The ACA aimed to make healthcare coverage more affordable and accessible by broadening Medicaid and subsidizing private insurance.

The mechanisms put in place had a far-reaching impact on how payroll management systems should be structured and operated.

Employment

One of the main points payroll managers should note when it comes to the ACA is whether your organization is designated as an Applicable Large Employer (ALE). Any ALE—a company that employs 50+ full-time employees—must offer Minimal Essential Coverage (MEC) to at least 95% of that workforce.

So, employers must carefully monitor their status as an ALE to determine their obligations under the ACA.

Hours of Work

Your obligations under the Affordable Care Act are also dependent on whether an employee is full-time or part-time. If an employee works more than 30 hours a week, they are designated as full-time and eligible for healthcare and benefits.

Part-time employees are defined as those who work from 1-30 hours per week.

Compensation

The Affordable Care Act has had a major impact on worker compensation claims for multiple reasons. Universal healthcare coverage means injuries that are not work-related are less frequently claimed as work-related.

Also, it has led to an increase in workplace wellness programs and a higher uptake of preventative care.

Benefits

Ruler and laptop on a desk

The ACA mandates an ALE to ensure that employees pay no higher than 9.66% of their household incomes toward healthcare coverage, along with a minimum level of coverage. Companies that don’t stick to these requirements can find themselves facing penalties for not doing so.

Lots of organizations choose to go above and beyond those requirements, as it offers a competitive advantage in attracting top talent to provide more robust healthcare coverage than is mandated. That could mean including dental, vision, or disability coverage, among others.

Furlough/Terminations

The COVID-19 pandemic has made the question of how furloughs and termination impact an employer’s obligations according to the Affordable Care Act. Healthcare provided through payroll is impacted by furlough because, even though the employee still technically works for the company, they are no longer accruing hours of service, so employers are no longer obliged to provide healthcare coverage.

However, many employers choose to keep furloughed employees on their health and benefits plans. What should be noted is that furloughs and terminations may impact your ALE status, and, therefore, your ACA obligations in the long term.

At SNF Payroll, we’re dedicated to providing human resource management software that helps you navigate complex payroll decisions and set-up. Get started today by calling us at 844-200-1870.

Sources:

  1. https://ldi.upenn.edu/brief/how-has-affordable-care-act-affected-work-and-wages
  2. https://www.adp.com/spark/articles/2016/08/what-impact-has-the-aca-had-on-employee-benefits-packages.aspx
  3. https://acatimes.com/workforce-management-aca-compliance-and-the-covid-19-pandemic/
  4. https://en.wikipedia.org/wiki/Affordable_Care_Act
  5. https://www.cognizant.com/whitepapers/the-affordable-care-act-and-its-impact-on-workers-compensation-codex1329.pdf