The following are two major developments related to the federal rules governing employee pay and benefits that employers need to be ready for this year.

New ACA Requirements Compliance

The Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer their full-time employees and their dependents minimum essential coverage that is affordable and provides minimum value. An ALE is defined as one having 50 or more full-time and full-time equivalent employees.

The ACA requirements are set to gradually unfold over several years to give companies time to ramp up their health care coverage to become compliant. New reporting requirements that must be on an ALE’s radar for 2016 include:

Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage.”
Employers must send copies of this form (similar to Form W-2, “Wage and Tax Statement”) to both the IRS and full-time employees. It reports the following information, for each full-time employee, broken down by month:

• Details about the type of coverage offered to each employee;
• Whether the employee was enrolled in the plan;
• The employee’s share of the lowest-cost self-only minimum value coverage; and
• Whether the affordability safe harbor or other transition relief applies.

Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.”
This form is similar to a Form W-3, “Transmittal of Wage and Tax Statements.” To complete an authoritative transmittal on Form 1094-C, employers must report:

• Whether coverage was offered to at least 70% of the organization’s full-time employees in 2015 (or 95% of its full-time employees in 2016 and beyond);
• The total number of 1095-C forms the organization issued;
• The number of full-time employees and total number of employees by month;
• Information about members of the aggregated employer group (if applicable); and
• Whether the organization qualifies for transition relief.

These forms are due to the IRS by February 29, 2016 (or March 31, 2016, if filing electronically) for the 2015 tax year. Employee statements must be furnished no later than February 1, 2016.

A potential pitfall may occur when employers assume that someone else is handling their ACA compliance. However, the responsibility ultimately lies with the company, not its audit firm, benefits provider, insurer, payroll company or tax preparer. If you want outside assistance, you need to specifically ask your advisor for it.

Additional Overtime

The U.S. Department of Labor (DOL) sets federal labor guidelines that apply to most public and private sector employees. On June 30, 2015, the DOL proposed changes to the overtime rules under the Fair Labor Standards Act (FLSA) that would make an estimated 5 million more workers eligible for overtime pay.

When employees work more than 40 hours per week, they are entitled to overtime pay equal to 1.5 times the usual pay rate. Under the current rules, white-collar employees are exempt from overtime pay if they meet these three requirements: First, they must be paid a predetermined and fixed salary. Second, they must be paid more than a specific salary threshold, currently $455 a week ($23,660 for a full-year worker). And, third, they must primarily perform executive, administrative or professional duties, as defined in DOL regulations.

Under the DOL’s proposed revisions, the salary threshold for the white collar exemption would increase to approximately $970 a week ($50,440 for a full-year worker) and would be adjusted annually.

When the comment period ended on September 4, the DOL had received nearly 150,000 responses from concerned stakeholders. The DOL could take several months to issue a final rule, which may include one-time or gradual increases in the proposed salary thresholds. Or, the proposal could be derailed indefinitely, causing significant uncertainty for HR professionals and employees.

Seeking Outside Help

To simplify matters, some smaller manufacturers and distributors opt to outsource all of their HR functions. Doing so allows management to focus on what they do best — making quality products and delivering them to customers. Contact your accountant or a qualified payroll provider with questions.

For more information on these regulatory changes, contact Seamus Donoghue at [email protected], or call him at 312.670.7444. Visit ORBA.com to learn more about our Manufacturing and Distribution Group.