A Checklist for ACA Compliance and the Contingent Workforce

Allie Ben-Shlomo, COO and EVP of Client Services, PRO Unlimited Print This Page

Inside Sourcing newsletters \ A Checklist for ACA Compliance and the Contingent Workforce

The Patient Protection and Affordable Care Act (ACA) is likely here to stay with the recent landmark King v Burwell decision by the United States Supreme Court. The implications of the law are far-reaching, with 2015 as the first year where the "Pay-or-Play" mandate is in effect.

ACA and contingent workers

Contingent workers pose unique complexities related to ACA compliance, as their employer of record is usually different from the party benefiting their work. Companies engaged with a managed service provider (MSP) or staffing agency that serve as the employer or record for all of its contingent workers - offering benefits commensurate with or exceeding those stipulated within the ACA - may have nothing to worry about.

Regardless, companies using contingent workers must ensure their third-party suppliers have sufficient systems and processes in place to demonstrate proof of compliance and ownership of responsibilities in the event of an audit. Worker misclassification and co-employment scenarios could result in the stiff penalties - both those for misclassification and/or co-employment as well as ACA.

One of the aspects of the "Pay-or-Play" requirements of the ACA is that it will undoubtedly increase costs for staffing suppliers that must ensure affordable coverage for their workers. This may decrease their margins - especially for lower paid workers. Tracking and reporting on compliance is another big cost for both employers and suppliers.

Checklist for ACA compliance

With more than two decades of experience in contingent workforce management, PRO Unlimited has been working with our clients, which includes global Fortune 500 companies, since passage of the ACA to ensure compliance. While the below checklist is not complete, it encompasses some of the more significant aspects of the ACA that companies need to know and moreover ensure that their suppliers have checked off.

  1. Organization size. Organizations with more than 100 full-time employees must comply with the ACA in 2015 (total full-time employees is counted based on numbers from 2014), while those with 50 to 99 full-time employees have until 2016 (based on 2015 numbers). Companies need to ensure classification of workers - whether self-sourced or through a third-party supplier - is accurate and documented with a traceable paper trail.
  2. Classification of workers. A contingent worker may or may not be on a company's payroll. They may or may not receive a W-2 from the company. They may or may not be offered coverage under the company's benefit plans. And based on answers to the IRS' Common Law Test, they may or may not be an employee. These questions must be answered to verify compliance with the ACA.
  3. Employer ("Pay-or Play") mandate. The ACA mandate consists of two components. The first requires employers to offer "minimum essential coverage" to at least 70 percent of their full-time employees and dependents in 2015. This increases to 95 percent in 2016. The second defines "affordable coverage" as the lowest, employee-only cost model that does not exceed 9.56 percent of household income. Companies need to ensure they have the right systems and processes in place to track all of these elements - and verify compliance - or face the penalties for failure to do so.
  4. Co-employment. Co-employment occurs when the IRS classifies the buyer and supplier of a worker as joint employers; as a result, both have equal responsibility for all aspects - including health coverage - of a worker's compensation. Without proper governance controls in place, a company (buyer) can be deemed responsible for a contingent worker as a full-time employee. The repercussions for co-employment are vast; much broader than just ACA penalties.
  5. Logistics of execution. The logistics of execution with suppliers of contingent labor and the buyer (company) can be quite complex. A number of checks and balances need to be in place to ensure proper documentation and compliance.
  6. Costs. Failure to comply - or demonstrate compliance - with the ACA can result in steep fines. It starts with misclassification of workers - $2,000 per worker - and escalates from there. Three questions need to be posed to determine the nature and amount of the penalty - do you offer "minimum essential coverage," does your plan meet "minimum value (viz., 60% of total costs), and is the plan affordable (less than 9.56% of annual income for each worker)?

The "Final Rule"

The ACA includes a "Final Rule" that places the ultimate onus for compliance on the company (or buyer) using the talent. This means that companies relying on third parties (e.g., MSPs and/or staffing suppliers) must ensure they are compliant with the ACA - or the repercussions could come back to them. Compliance is thus something no company can take lightly.


PRO recently created a White Paper on "The Affordable Care Act and the Impact on Contingent Labor Management" that delves into greater detail on the above checklist of considerations. Owners and stakeholders of contingent labor can download it to assess their organization's ACA readiness and that of their suppliers.

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