Over 10 years after the ACA was first signed into law, the reporting requirements under the ACA’s Employer Mandate have proven challenging and time-consuming for most. But quick-service restaurants have it harder than others.
Minimizing costs and increasing employee retention in the restaurant space is difficult already. Add the administrative burden of the ACA to a restaurant owner’s to-do list and you’re looking at another full-time job.
With so many intricacies and nuances surrounding the ACA, there is a lot of room for error.
Below are five common mistakes restaurant owners make in their efforts to comply with the ACA’s Employer Mandate, as well as guidance on how to avoid them, regardless of your industry.
Mistake 1: Believe full-time employees work 40 hours a week
It is commonly believed that full-time employees work 40 hours a week, but that’s not the case under the ACA. To be full-time under the rules of the ACA, employees only need to work 30 hours a week or 130 hours a month.
We’ve seen restaurants make this mistake time and time again. And when they inaccurately set this hourly requirement for being full-time, many employees get incorrectly grouped into the wrong designation.
Mistake 2: Extend health coverage offers late
Time is of the essence when extending an offer of health coverage and there is a window for when a full-time employee must receive an offer of health coverage.
Depending on the measurement method used to determine full-time status, an employee hired with the understanding that he or she will be working full-time designated hours by an employer may be required to receive an offer of coverage by the first day of the fourth calendar month from their date of hire. For instance, someone hired on March 6, may need to receive an offer of healthcare benefits by June 1.
While it’s true Limited Non-Assessment Periods provide employees with more time for not offering coverage, restaurant owners frequently apply them incorrectly and subsequently miss the window for offering coverage.
Mistake 3: Offer Unaffordable Plans
Offering health insurance to 95% of your full-time workforce is one piece of the puzzle. Ensuring the plan is affordable and meets Minimum Value is the other. And too often we see restaurant owners create their own methods for demonstrating affordable coverage.
Instead, they should leverage IRS safe harbors. These IRS-sanctioned methods prove affordability and there are several types, including the Federal Poverty Level Safe Harbor, The Rate of Pay Safe Harbor, and the W-2 Safe Harbor.
Mistake 4: Keep disorganized payroll records
If you haven’t already done so, now would be a good time to perform some general cleanup on your record keeping. Messy payroll data can result in inaccurate employee classification. Disorganized time and attendance records can result in employers failing to identify full-time employees correctly.
With inaccurate employee classifications, employers are putting themselves at greater risk by potentially failing to extend offers of coverage to eligible employees. Organized payroll and time and attendance records are critical for business success for more reasons than one. Don’t sleep on this one.
Mistake 5: Forget to make offers at the start of every plan year
Oftentimes employers think that once they extend an offer of healthcare, it’s good forever. The reality, however, is that the offer is only good for the duration of the plan year. It is important to re-offer healthcare benefits at the beginning of every plan year.
With the right information, the requirements of the ACA can be one less thing to worry about. If you’re looking to mitigate risk, don’t overlook these five common mistakes.
In fact, now is a perfect time to make some changes in how you undertake ACA compliance activities. With the 2021 ACA filing period officially behind us now, consider getting your ACA Vitals to learn about any potential hang-ups in your ACA compliance process.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.