Editor’s Note: Today’s post is another in an informative series from our friends at TriNet. I hear lots of discussion in the startup scene about technical issues, finance, marketing, and other matters, but very little about charting out a course that involves scaling with actual employees. A startup can only get so far with contractors, interns, and students. For one thing, there are limits on how you can utilize contractors before having to classify them as employees and deal with payroll taxes, work rules and benefits. More important, if you are successful, sooner rather than later you will need to be concerned about recruiting and retaining a workforce that cares in particular about benefits. You’ll have employees with spouses and children, and pay will involve more than just a salary number. Part of your culture will be the way your compensation addresses the total circumstances of anyone who works in your venture. And, your friendly government will be your partner in the ever-changing rules about these issues.
Scaling a company to hundreds or thousands of employees is a great calling. In your golden years (30+ for some of you?), your best memories will be all the stories of your colleagues, mostly great, some bad, some just wacky. Someone has said running a business would be easy but for the people. But, people make it tick, and, to me, that is the fun part. If today you have just two contractors and are barely getting underway, file this thought and the information in this post in the back of your mind; you should hope to thinking about these issues in the very near future.
In June 2012 the Supreme Court upheld the Patient Protection and Affordable Care Act’s (“ACA”) individual mandate as constitutional under the government’s power to collect taxes. As a startup, you probably have questions about what impact this decision has on your benefits plans and programs. Here are some key points related to the ACA that you should keep in mind:
Healthcare Reform Mandates for 2012
While many of health care reform’s most sweeping changes are not yet being enforced, there are ACA requirements and provisions scheduled to go into effect this year, and it’s important to know what these are in order to maintain compliance.
· The cost of company paid health benefits must be reported on Form W-2 (effective with 2012 W-2 issued in January 2013).
· Health insurers and plan sponsors will be required to issue a uniform explanation of coverage that includes a Summary of Benefits and Coverage (SBC) explanation effective September 23, 2012. Appearance, language, and content standards were defined by the United States Department of Health and Human Services (HHS).
· Medical plans are required to provide coverage for certain women’s preventative services without cost sharing (effective for plan years that begin on or after August 1, 2012).
A Reprieve -- Postponed Pending Regulatory Guidance
Nondiscrimination testing requirements were expected to take effect in 2012 but have been postponed. This testing is designed to prevent plans from discriminating in favor of highly compensated worksite employees with respect to plan eligibility or benefits (effective date pending release of regulatory guidance).
How Do I Know if My Business Qualifies for Any Health Care Reform Tax Credits?
Certain small businesses are eligible for a tax credit, provided they contribute a uniform percentage of at least 50 percent toward worksite employees’ health insurance. Small businesses can claim the full credit amount if they have 10 or fewer full-time equivalent worksite employees (FTEs). FTEs are calculated by dividing the total hours worked by all worksite employees during the tax year by 2,080, with a maximum of 2,080 hours for any one worksite employee. Also, the company’s average taxable wages must be $25,000 or less. The credit is phased out as the number of FTEs increases from 10 to 25 and as average worksite employee compensation increases from $25,000 to $50,000. Small businesses with more than 25 worksite employees or an average annual compensation greater than $50,000 are not eligible for the credit
The Year Ahead
Over the course of the next year, small businesses will need to remain vigilant on additional regulatory mandates related to ACA provisions that affect group health plans, including requirements that impact automatic enrollment, the employer “pay or play” mandate, and non-discrimination testing.
It can be daunting trying to keep up with all of the aspects of health care reform, but a great resource for keeping up to speed on how the provisions of the ACA will impact your company is the TriNet Health Care Reform Website. Check this resource regularly to learn about specific requirements you will need to adhere to and recommendations for how to best cope with the changing healthcare reform landscape.