Even though the Affordable Care Act’s employer mandate is in effect, few credit unions have updated their employee handbooks to reflect the ACA. Here are some ways credit unions may bolster their ACA compliance—and avoid ACA penalties—through an ACA-focused employee handbook review.
While credit union HR managers are undoubtedly already fatigued by ACA compliance, there are several reasons to take on this exercise.
1. The handbook can be used to help document an “offer of coverage.”
Under the ACA, large employers (generally, those with 50 or more full-time and full-time equivalent employees) must either make a good “offer” of affordable, minimum value coverage to full-time employees (30+ hours per week), or risk a steep penalty – up to $2000 per full-time employee per year.
The IRS has not been entirely clear as to what sort of documentation is needed to constitute an “offer of coverage.” In our view, the platinum “offer” standard is an advance written notice describing the offer and enrollment instructions in detail, coupled with a waiver from all employees who decline the offer. But what if an employer cannot get waivers from all employees? In that case, an employer will want to show that employees received so much information about the offer that they must have known medical coverage was available. A widely-distributed handbook with clear information about the offer and its terms can be a valuable part of an employer’s information blitz.
2. The credit union is not in compliance with the ACA, and the handbook reveals that.
The ACA’s employer mandate is not an easy thing to figure out. Some credit unions have made heroic efforts to comply, but have simply misunderstood the rules. Others have received incorrect advice from their advisers. Some credit unions are in denial, or avoiding compliance in hopes of a repeal. For whatever reason, something is not quite right.
For example, here are two very common issues that I continue to see:
- Exclusion of temps, interns, co-ops, casual employees, and similar groups. The ACA’s employer mandate does not allow categorical exclusions of this sort. The ACA requires that an offer be made to full-time employees, defined as anyone who works more than 30 hours of service per week. All paid hours count as “hours of service”, except for very narrow exceptions (hours of students on work study, non-profit volunteers, and religious who have taken a vow of poverty, as well as hours related to non-US income). In sum: Employers can call an employee a “temp” or “intern”, but if the employee works at least 30 hours per week, he or she is full-time; if an employer doesn’t offer affordable, minimum value medical coverage to that employee, the employer risks ACA penalties.
- Prohibited waiting periods. The ACA’s insurance reforms prohibit waiting periods of more than 90 days before major medical coverage can start. It is important to remember that there must be an opportunity for the employee to begin coverage no later than the end of the 90-day period. We continue to encounter plans that permit employees to start coverage “on the first day of the next month following the 90th” The IRS and DOL have made clear that this interpretation is unacceptable. Similarly, a three-month waiting period does not work, since three months is often more than 90 days.A handbook review can help a credit union employer identify – and remedy – these sorts of errors.
3. The credit union is in compliance with the ACA, but the handbook does not reflect that.
Employers who worked hard to tighten up their plans and policies to comply with the ACA should make sure that handbooks and any other employee communications are updated to reflect their efforts. This will help avoid any unnecessary employee confusion and questions about what the current eligibility standards are. But more importantly, this will help avoid any unnecessary IRS or DOL confusion in the event of an audit, which leads to my final point:
4. If a credit union is audited, the IRS or DOL will probably ask to see the handbook.
In some recent audits, the DOL has begun requesting handbooks as part of its document request. When the IRS starts its ACA audits (as soon as this summer) there’s a good chance the auditor will request the handbook as well. The last thing you want is to hand over an employee handbook that reveals ACA noncompliance.