October 22, 2013
How Does the Affordable Care Act Affect Churches?
Attorney Frank Sommerville walks churches through the next two years of changes.
Q: What are some provisions of the Affordable Care Act that take effect in 2013 and 2014 that churches should be aware of?
A: Well, the biggest provision that affects 2013 is going to be changing your cafeteria plan limit for medical expenses to $2,500. But the really big problem is planning in 2014 for 2015, because all portions of it go into full effect for employers on January 1, 2015.
Small churches are going to be okay if they have less than 50 full-time equivalent employees. And there are regulations and tests for that. But it's those that have 50 or more full-time employees that have to be careful about defining who is a full-time employee, because it's not a definition that's used anywhere else. And if you have 50 or more full-time equivalents, you have to provide access to insurance.
In testing for full-time employees, the statute uses 30 hours per week as fulltime.
The regulations have created three periods. There is a compliance or testing period. There is an administrative period. And then there's a stabilization period.
If the testing period can be between 6 months and 12 months, 2014 is the testing period. If, during the testing period, an employee works on average of thirty hours or more per week, then they are going to be considered full-time. And then you have the administrative period, which says within 90 days, those employees who averaged thirty-plus hours during the testing period have to be covered by insurance. Any adjustments that are going to be made to employee schedules have to be made this year, if you're trying to drop them to part-time status.
If you're using the 12-month test, and there's someone who is, on average, working 30 hours or more for the prior 12 months, you have to provide coverage or access to coverage for the next 12 months, even if they don't work the 30 hours per week.
So whatever they are doing today will affect the insurance availability and cost in 2015. They need to be measuring those times today, and they need to be computing the people's times so that they see if they fall under that 30-hour rule. There is one exception, and that's for temporary workers. That would be someone who works less than 120 consecutive days within the year. So if you're hiring temporary help, you don't have to do the testing even if they are 30 or more hours per week.
The other definition of full time, aside from the 30-hour test, is anyone that the employer designates as full-time, regardless of the number of hours they actually work. If the church is providing benefits to employees that work 25 hours per week and they consider them full-time because of their benefits, then the 30-hour test goes away, and you apply 25 hours that the employer as already defined.
There are two penalties that are involved. If you don't provide access to the health insurance, there is a monthly penalty that can go up to $3,000 per year for the failure to provide the access. Each month that that employee does not have access to health insurance, you get fined.
The other penalty is that it must be affordable. And that means that the employee portion of the health insurance premium cannot exceed 9.5 percent of that employee's W-2 wages. This is going to affect the church's cost, especially with lower-income employees, because if you have a full-time employee who's making $30,000 a year, that person's health insurance cost has to be less than $250 a month, and that may be difficult to find. So that is adequate minimum coverage.
Those are the types of things they need to be doing the testing on and setting the test period and determining who's going to be a covered employee for the portion of Affordable Care Act.
If your church does not provide healthcare coverage for employees, the Affordable Care Act still mandates them to obtain coverage. Be sure to see the upcoming article, "Meeting the Mandate" in the December issue of Church Finance Today to learn how to help them decide what's best for them. Not a subscriber yet? Sign up today to receive this and a whole year's worth of invaluable information for churches.