ACA Compliance for Staffing Firms

The Affordable Care Act (ACA) has significantly impacted the staffing industry, placing new responsibilities on staffing firms to ensure compliance. These regulations can be complex, especially for businesses managing a large, fluctuating workforce. In this post, we will break down ACA compliance for staffing firms, the challenges they face, and best practices for staying on the right side of the law.

What is the ACA?

The ACA, enacted in 2010, introduced sweeping reforms to the U.S. healthcare system with the primary goal of expanding access to affordable health insurance. One of its key provisions is the Employer Shared Responsibility requirement, which mandates that employers with 50 or more full-time or full-time equivalent (FTE) employees provide health insurance that meets ACA standards. If they fail to do so, they could face substantial penalties.

For staffing firms that operate as the employer for their staff rather than using an Employer of Record (EOR), tracking hours and offering the correct coverage can become a significant challenge.

ACA Compliance Challenges for Staffing Firms

1. Employee Classification: The most pressing issue for staffing firms is properly classifying employees. The ACA defines a full-time employee as someone who works 30 hours or more per week. This means that even temporary workers can quickly qualify as full-time, triggering the ACA’s insurance requirements. Staffing firms must carefully monitor employee hours to determine eligibility for coverage.
2. Variable Hour Employees: Staffing firms often hire employees with variable hours, making it hard to predict their full-time status. The ACA provides for a Look-Back Measurement Method, which allows employers to determine an employee’s status as full-time or part-time based on a previous measurement period. This method can help staffing firms manage ACA compliance but adds an extra layer of complexity.
3. Affordability and Minimum Value: ACA-compliant health insurance must meet two key criteria:
   • Affordability: The employee’s share of the premium for the lowest-cost plan cannot exceed 9.12% of their household income (for 2023).
   • Minimum Value: The health plan must cover at least 60% of the total cost of covered services.

For staffing firms, it’s critical to provide insurance that meets both of these standards or risk incurring penalties.

1. Tracking and Reporting: ACA compliance requires detailed reporting through Forms 1094-C and 1095-C, which outline the type of coverage offered to employees, their full-time status, and other critical data points. Accurate tracking is essential, and mistakes can lead to penalties from the IRS.

Best Practices for ACA Compliance

To ensure compliance and avoid costly penalties, staffing firms should implement these best practices:

1. Use Technology to Track Hours: Given the fluctuating nature of staffing workforces, manual tracking of hours can be error-prone and time-consuming. Investing in software or using an Employer of Record (EOR) platform like FoxHire can help automate hour tracking and compliance reporting, ensuring that employees are classified correctly and that health benefits are offered when necessary.
2. Adopt the Look-Back Measurement Period: For variable hour workers, the Look-Back Measurement Method allows staffing firms to assess the full-time status of employees based on historical data, rather than fluctuating weekly hours. This method provides a more predictable way to manage health coverage obligations.
3. Ensure ACA-Compliant Insurance Options: Partner with an insurance provider that understands the unique needs of staffing firms and offers plans that meet ACA affordability and minimum value standards. Regularly review plans to ensure they remain compliant as regulations and market conditions change.
4. Stay Updated on ACA Regulations: ACA compliance is an evolving issue. Staffing firms should stay informed about changes in ACA guidelines and how they impact employer requirements. Working with legal or compliance experts can help ensure ongoing compliance.
5. Leverage an Employer of Record (EOR) Service: EOR providers like FoxHire can simplify ACA compliance for staffing firms through their platform that handles payroll, benefits, and compliance reporting. This is particularly helpful for firms that lack the internal resources to manage the complexities of ACA regulations on their own.

Penalties for Non-Compliance

Non-compliance with ACA requirements can result in two main types of penalties:

1. The “A” Penalty: If a staffing firm does not offer coverage to at least 95% of its full-time employees, it may face a penalty of $2,970 per full-time employee (minus the first 30 employees) if one employee receives a subsidy for coverage through the Health Insurance Marketplace.
2. The “B” Penalty: Even if the firm offers coverage, if the insurance does not meet the affordability or minimum value requirements, the penalty is $4,460 per full-time employee who receives a subsidy for Marketplace coverage.

Final Thoughts

For staffing firms, ACA compliance is critical to avoid penalties and ensure that temporary and full-time employees receive the health benefits they need. The key to successful compliance lies in understanding the law, carefully tracking employee hours, offering compliant coverage, and leveraging technology or third-party services like FoxHire to manage the administrative burden. Staying proactive with ACA compliance will protect your business and provide better support for your workforce.

This blog post outlines the intricacies of ACA compliance, particularly focusing on the unique challenges that staffing firms face. Let me know if you’d like to include any additional sections, such as case studies or specific examples from FoxHire’s experience!