Small and Mid-sized Businesses Take Note: 5 Things Not to do Regarding Health Reform

By Sheryl Southwick, Director of Compliance, TriNet

There are millions of articles and webpages that describe the Affordable Care Act (ACA). At least the same amount of articles and websites provide insight and opinions on this major piece of U.S. legislation. At TriNet, we serve over 7,000 small and medium-sized businesses throughout the U.S. as a strategic partner for payroll, HR, benefits and employment law compliance and risk reduction; and we have noticed a growing – and wrong – notion that not all small businesses need to take action on the ACA. Some also believe there are clever workarounds – there are not.

ACA myths and legends abound, some of which have been mistaken for fact. With so much misinformation about the ACA, some businesses may find it harder to understand the ACA with each day that passes. But, three things are crystal clear: the ACA is complex, its roll out will not be without headaches, and small businesses – of all sizes – will have to understand ACA requirements and take action.

Even though the government recently announced that two ACA provisions—the employer mandate and reporting requirements--will not be implemented until 2015, there are processes and compliance requirements that you need to act on now or in the very near future. Failure to do so could be costly.

In order to help businesses stay on the right side of the ACA, here are five simple what-not-to-dos:

1. Don’t think there is nothing to do: All businesses -- no matter the size -- have an action to take. For instance, even if a small business does not offer health care, it still has to make all employees aware of the health insurance exchanges where they can purchase their own plans. Failure to do so equals non-compliance with the potential of hefty fines.

2. Don’t try to morph your employees into something they are not: Changing employees to independent contractor status to reduce your FTE count is not advised. There are several criteria involved in determining employee classification. Simply changing employee classification without conforming to defined legal criteria might push you into non-compliance on multiple fronts, including the ACA, the Internal Revenue Service, and the wage and hour laws and regulations regarding overtime, exempt status, and the like. This would expose you to lawsuits and myriad non-compliance penalties.

3. Don’t create a dual business model: Several criteria of the ACA become relevant to businesses with over 50 FTEs. We have heard several small businesses suggest that they can circumvent the rules by splitting their business into two and setting up a separate business each hiring under 50 employees – each with different Federal Employer Identify Number (FEIN). This is not advisable as the government assesses headcount based on overall business ownership. So, if you own two businesses, the total headcount of both will most likely be tallied up. This ill-conceived work-around could work up some pretty big non-compliance penalties.

4. Don’t believe it will be easy for employees to get health insurance from the government: There will be marketplaces (or exchanges) where everyone will be able to buy health care without the exclusion clauses of the past. However, employees will have to navigate these marketplaces. The application process is likely going to be pretty arduous and premium costs are still unknown. Your employees may have a negative experience with the process.

5. Don’t wait: Don’t think you can wait until 2015! Most of the ACA’s regulations have not been delayed and you need to get started now. Once all elements of the ACA become effective, employer penalties will be assessed and managed with a retroactive point of view, so you need to pay attention and start planning to comply now.

Even without the ACA, a national survey* purported the average small business owner spends 25 percent of time on HR paperwork. Yet, the silver bullet of business success, particularly with small and entrepreneurially driven businesses, is being able to stay laser focused on the vision, mission, and the core competency of the business. How do you maintain focus on the business without being over-burdened by complex employment laws and compliance with new laws such as ACA? Seek help from experts. To help you on your way, you can download a simple guide that illustrates the requirements of the Act by employer size. The sooner you get smart – the sooner you mitigate risk of non-compliance.

*Source: U.S. Small Business Administration

About the Author

Sheryl Southwick has over 15 years of experience in retirement and benefits, helping ensure that companies are in compliance with state and federal laws and regulations. As director of compliance at TriNet, Sheryl helps SMBs navigate the complex issues of compliance. Previously, Sheryl was director of compliance of Gevity, which was acquired by TriNet.