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Home Affordable Care Act Gig-Economy Worker Benefits Will Affect ACA Compliance

Gig-Economy Worker Benefits Will Affect ACA Compliance

3 minute read
by Robert Sheen

3 minute read:

It’s no mystery that both companies and consumers benefit from the gig-economy, but what about the workers? Sure, it provides a means to an end, but workers are still missing a major component of employment — benefits.

With states beginning to loosen business closures, more Americans are going to turn to gig-employment as a way of making ends meet. According to an article by the Harvard Business Review, “Today’s gig economy sprung from the last recession, and these gig work platforms — which offered a job to anyone who wanted one — emerged as a lifeline for many facing financial instability.”

As a result of COVID-19, the current unemployment rate is hovering around 11.1%. Roughly 48 million Americans have filed for unemployment and related insurance and although the CARES act has allowed gig-economy workers to qualify for unemployment and benefits, they end July 31, 2020.

The question is, with more Americans turning to the gig-economy for work, when will they receive long-term benefits? It may be sooner than you think.

Already, ridesharing giants Uber and Lyft have promoted a ballot measure called the “App-Based Driver Protection Act” (Driver Act) which reclassifies workers as independent contractors with pseudo-employee benefits. One of the more prominent benefits provided to these new quasi employees under the act would be a “healthcare subsidy consistent with the average contributions required under the Affordable Care Act (ACA).” While not exactly what drivers are fighting for, it’s progress and a step in the right direction for providing gig workers with essential benefits.

Individual states too are taking measures into their own hands to ensure gig-employees are protected.

In Virginia, House Bill 984 was passed earlier this month which adopts the IRS guidelines for distinguishing independent contractors and employees. The bill presumes that all workers that provide a service in exchange for compensation are considered employees and essentially lays the foundation for employers to provide independent contractors and gig-economy workers alike with benefits.

California and New Jersey have similar laws but distinguish employees and independent contractors by conducting an ABC test. Under the ABC test a workers employment classification is determined under three criteria:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

While the IRS guidelines conduct a different test than California and New Jersey for determining independent contractor status, it is unclear how the IRS will be able to differentiate between the state and federal standards with respect to ACA reporting.

For workers that are reclassified as employees, employers should account for tracking hours of services, wages, and other employee level details for ACA compliance and reporting purposes, as required by the Employer Shared Responsibility Provisions, also known as the Employer Mandate.

As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA Employer Mandate, organizations with 50 or more full-time employees and full-time equivalent employees are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties. The healthcare law defines full-time employees as workers who average 30 hours of work a week or 130 hours a month.

Employers, the responsibility falls on your shoulders for ensuring you are complying with state and federal legislation in regards to employment classification. With more legislation coming into play for providing independent contractors and gig-economy workers with benefits, now more than ever does your ACA compliance process need to be tight-nit.

Now is the time to assess your workforce and incorporate any potentially newly classified employees into their ACA compliance process. Employers will need to extend offers of health insurance coverage to more employees, and reporting requirements will grow in complexity.

Contact us to learn how ACA Complete can help your organization handle the growing complexities surrounding employee benefits and classification.

We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

Gig-Economy Worker Benefits Will Affect ACA Compliance
Article Name
Gig-Economy Worker Benefits Will Affect ACA Compliance
The battle wages on for gig-economy benefits with unemployment and insurance under the CARES Act set to expire at the end of the month.
Publisher Name
The ACA Times
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