The Affordable Care Act has been big news of late. While the government shutdown and the debate over Obamacare have garnered headlines, what’s been explored in far less detail is how the provisions within the Affordable Care Act will concretely affect employers in terms of the administration of benefits and payroll. With significant penalties awaiting ACA scofflaws, though, it’s an important topic for business owners and payroll departments to understand.
What do you need to know? What are the major changes that affect payroll and benefits? What software tools can help you manage changes? Read on to get answers from experts in the field.
The Affordable Care Act features different rules for organizations depending on the number of full-time employees. What do employers need to know about tracking employee hours in light of these changes?
For an employer who meets (or needs to determine if they meet) the requirements to provide health insurance, a significant piece of information to track and report is the number of hours worked by an employee in the employer’s designated reporting period. If an employee averages more than 30 hours a week during the reporting period, the employer may need to offer health insurance to the employee.
You can use your payroll system to run a report, detailing average hours worked by each employee over a designated date range. The information on the report provides a management tool for the employer to identify work hours and determine future health insurance liability requirements.
—Mark Machtemes, business development manager at Red Wing Software, developer of CenterPoint Payroll
One of the changes brought forth by the ACA is a limit on employee contributions to flexible healthcare spending accounts. Is this something the right software can help manage and how so?
Yes, with the right payroll software you can limit the contribution amount for a healthcare spending account so that the deductions stop when that limit is met. When you set up a deduction code with a limit and a balance, you can track the balance remaining to be deducted and it will stop at that limit.
—Elizabeth Counts, director of business development at Perryman & Associates, a software integrator supporting Sage HRMS
Another change taking place due to the ACA is the increased percentage employees over $200k for single filers and over $250k in Modified Adjust Gross Income will have to have withheld for Medicare Part A Hopsital Insurance. Will this be taken care of by standard payroll tax table updates or are there other considerations payroll administrators need to be aware of?
A payroll administrator should always be aware of such changes, to be sure. The best solution is to be using software that handles a change like this for you behind the scenes, but to verify its accuracy before it becomes a problem. Software that lets you model payments to employees will help ensure that calculations are coming out correctly before you ever process an actual check.
—Ray Fazel, owner of Paymate Software, developer of Clarity Payroll
Small employers (under 50 employees) providing insurance to employees with average annual wages of below $50k per employee may qualify for small business tax credits up to 35% to offset insurance costs. How can payroll administrators and small business owners keep track of eligibility and request this tax credit?
A payroll program should be able to track unlimited employee history and report employee wages earned, taxes, deductions and benefits paid over any time period. This reporting capability provides an employer the information to determine if they may qualify for tax credit incentives.
How will coverage choices affect ACA compliance and business operations?
Compliance begins with choice of coverage. Find out now what you can change or work into your current coverage plans in order to maximize the benefit for the business. Being able to take advantage of the small business tax credit can be a huge benefit to the business as a whole. Making sure you are providing coverage at a required standard puts employees at ease and helps with productivity.
Payroll software providers will be working to create standard reports and make sure that their custom reporting solutions will meet your needs in these areas. By using a flexible, easy to use payroll software solution you’ll be able to analyze and report accurately and in a timely fashion.
Are there any other considerations regarding ACA compliance for businesses to keep in mind?
Stay close to your HR and payroll provider to ensure that you are receiving regular updates that are keeping your software in compliance with the latest legislative changes.
To find out more about employer payroll, benefits, and takes compliance requirements brought about by the Affordable Care Act, visit the informational page provided by the US Small Business Administration.
Adam Bluemner is the project specialist manager for FindAccountingSoftware.com, a service providing free software selection assistance. Over the last decade he has spoken with over 10,000 companies, helping them achieve business success through intelligent software investment. He writes extensively on ERP and business software. Follow him on Twitter @FindMySoftware.