Thursday, June 2, 2016

How to Convert Non-Hourly Compensation into ACA Service Hours

As an Applicable Large Employer (ALE), it’s your responsibility to make sure you make offers of health coverage and benefits to your full-time employees, which the IRS determines based on the amount of hours they work per week (30 or more, and they’re full-time).

But what about your employees whose compensation isn’t based on their actual hours but on their output of work? In the instance of commission-only sales persons, pieceworkers, adjunct faculty, or any other workers whose hours you don’t track, you’ll need to develop a method of converting the work they’ve done into an hours-of-service equivalent consistent with the ACA regulations under Section 4980H.

These regulations essentially boil down to your method must be “reasonable” in the eyes of the IRS; in other words, the method can’t be designed to limit the employee’s right to a health insurance offer. This means you’ll more than likely have to take into account hours other than the ones the employee produced work to figure out their status (i.e., travel time for your commission-only sales people).

There are also varying, industry-specific methods to determining the status of pieceworkers, or workers who are paid according to the number of units of work produced:

  • In the fishing industry, workers are often compensated based on the weight of their catch, so their employee status can be determined by how long the fishing boat was out. If on average during the measurement period, the boats were out for 12 hours each day, each worker would be credited 12 hours each day he/she was out on the boat.

  • Some of our ExpressTruckTax users may want to pay attention to this one: companies who pay their truckers based on their miles traveled can convert those miles into hours worked. A good conversion rate, based on speed limits and break times, is 50-miles-to-1-hour-of-service. So, for example, a trucker who traveled 400 miles in one day would earn 8 hours toward his/her full-time status.

  • For agricultural workers, like apple pickers, paid based on what they gather each day can use the bins or baskets they gather as an hour conversion method. For example, you pay your workers $12 per bin of apples they collect daily, estimating that it takes about an hour to pick a full bin. If your records reflect you paid an employee $99 one day, you can divide that by the $12/bin to determine he/she worked roughly 8 ¼ hours.

  • The IRS has outlined a way to determine the status of adjunct faculty members at higher-education institutions. For employees who are paid by the class, 2 ¼ hours of service should be included per week (to cover teaching and classroom time in addition to out-of-class work like lesson prep and grading) for each hour of classroom time. Additionally, 1 hour of service per week should be included in their total for each additional hour outside of the classroom they spend on their required duties, such as during office hours or faculty meetings.

If you’ve already got your employees work hours totaled and are ready to file your ACA forms, log into your ExpressIRSForms account today to get started! Or, check out our full-service filing option, ExpressACAForms. If you’re not sure which you’d like to try, just give us a call at (704)-684-4751 and we’ll be happy to help you get started.

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