Another measurement timeframe termed “Initial Measurement Period” (IMP) is required for new employees, including seasonal workers. The IMP is identical to the workings of the SMP, is between three and 12 months, and may begin on the start date or the first day of the following month. In addition, the IMP and AP timeframes cannot extend beyond the last day of the first calendar month after the employee’s one-year anniversary (13 full months).
Here’s an example: Hire a variable-hour worker on Jan. 15, 2013, using a 12-month IMP. Thus, hours are measured from Jan. 15, 2013, to Jan. 14, 2014 (or Feb. 1, 2013, to Jan. 31, 2014), to determine if the employee meets FTE status. If he or she qualifies for FTE status, coverage must begin by March 1, 2014, and be available for 12 months (same as the IMP timeframe) or penalties apply (AP is shorter for new employees).
But you must also include this new employee in the SMP measurement period for the following year (Oct. 1, 2013, to Sept. 30, 2014), and if he or she is deemed an FTE, the person must be included in coverage from Jan. 1, 2015, to Dec. 31, 2015. If the employee fails the SMP test, you still provide coverage up to Feb. 28, 2015, based on IMP testing results. Thus, all “new employees” may fall into the “ongoing employees” pool for testing purposes.
Penalties for large employers
Offering no insurance means the non-deductible penalty is $2,000 (2014 rates) times FTEs in excess of 30, even if only one employee seeks a subsidy on the exchange. For offering unaffordable insurance (or not meeting minimum value criteria), the penalty is $3,000 for each FTE receiving a subsidy via the exchange, limited to $2,000 times each FTE in excess of 30.
Obviously, the new regulations increase the administrative burden on school bus contractors. Even if companies classify some school bus drivers as FTE and offer health insurance, it appears almost certain that some drivers will be eligible for government assistance due to the unaffordable features included in ACA. Thus, the operating costs to larger contracting businesses will increase, and contractors may find that paying the penalty is cheaper than offering health insurance.
Bruce Leauby is associate professor of accounting at La Salle University’s School of Business in Philadelphia.