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January 27, 2014

Staffing companies find unique challenges in ACA

PHOTo / Tim Greenway Annette Lefebvre, executive vice president and controller at Bonney Staffing in Portland, welcomes the extra year her company has to figure out ACA compliance,

Uncertainty is a fact of life for staffing companies, says Annette Lefebvre, executive vice president and controller of Bonney Staffing Center. But even with almost 25 years in the business, she admits the Affordable Care Act has been off the chart in the complexity and questions it's creating for her company and other staffing firms.

“We attended so many conferences and webinars last year on the ACA, and every time it seemed something new came up or something had been changed,” she says. “We'll be doing the same this year.”

Not surprisingly, then, Lefebvre says she was relieved by the one-year delay in the employer mandate announced by the Obama administration last July. The new rollout date of Jan. 1, 2015, she says, gives her an extra year to fine-tune Bonney Staffing's internal monitoring of its employee count and calculate the associated pay-or-play costs that companies with 50 or more full-time employees otherwise would have incurred at the start of this year. It's a reprieve other businesses are using to work out their benefits plans, especially those employers with a variable work force.

The ACA-related costs are not insignificant for Bonney Staffing, given the 3,000 to 3,200 job seekers who are considered to be its employees once they've been placed with a client company and remain so until the assignment ends or a full-time job is offered to them. Nor are they insignificant to the staffing firm's clients, since Lefebvre acknowledges Bonney is still evaluating whether those new ACA-related costs will be folded into the overhead that's part of the variable hourly rate it charges.

It's an issue with both national and statewide impact: The American Staffing Association's December monthly report shows staffing employment is up 9.6% nationwide compared with the same period in 2012, and Lefebvre says that trend is mirrored in Maine, where the ASA's latest survey shows the state's staffing firms generating more than $144 million in annual payroll for 26,473 employees.

Staffing companies aren't alone in navigating the ACA's challenging terrain when it comes to a temporary work force. Similar challenges face restaurants, supermarkets, hospitality, retail, health care and construction and other industries prone to employing people in seasonal or variable-hour jobs. Like Lefebvre, they're glad to have 2014 be a practice year that allows them to build their tracking and compliance systems at the same time they're transitioning to comply with the ACA's employer requirements.

Challenging questions

The obvious business decision a company with 50 or more employees faces under the ACA is pay-or-play. For staffing agencies, there's the added question of whether that additional cost will be passed on to the companies that contract with them.

“Either way, if we pay or play, we have to determine if we pass the cost onto our clients,” Lefebvre says. “That's still under evaluation. Do we spread out the cost over all our clients? Or just apply it to the temps who qualify [for health coverage] on a long-term basis? Until we get the actual numbers we can't make an actual decision.”

Likewise, computing how many of those employees are full-time — the first step in calculating Bonney's ACA-related business costs — is not simple. The ACA defines full time as 30 hours per week.

“Some of our employees are 'temporary' or 'temp to hire,'” she says. “Some can be hired for a week or two weeks. Others we're not sure of how long their assignment will be. We might put them to work today on a two-day event, then another client picks them up for a longer job assignment. It's challenging.”

Lefebvre says her anxiety over determining how many workers qualify as full-time employees is less than it would have been thanks to the agency's software vendor, Avionte, based in Eagan, Minn. She says Avionte, which works with a lot of staffing agencies, has updated its software program to track each temporary employee's weekly and long-term hours in relation to their status under the ACA. In simple terms, she says, the software will flag to her attention any employees who reach the ACA's full-time employee threshold of 1,560 hours in a year.

The software, coupled with the one-year employer mandate reprieve, will give her a solid base to determine the company's ACA obligations and costs beginning on Jan. 1, 2015, she says. “Without the software, that would be an absolute nightmare for me,” she says. “We were actually thinking we'd have to hire more people just to keep track of that.”

Look-back period

Lefebvre credits the American Staffing Association with helping to persuade the Obama administration to modify the Department of Treasury and Internal Revenue Service rules for variable hour employees in relation to the ACA's full-time health coverage requirement. Recognizing that many businesses, not just staffing agencies, have seasonal or intermittent labor requirements, the federal agencies crafted a “look-back” regulation covering employees who may work full time only part of the year. The provision allows companies to identify workers to whom they must offer coverage by looking back at the last 12 months of employee timesheets. Under the look-back provision, employers choose a measurement period of between three months and 12 months to determine employees' average weekly work hours. If an employee works an average of 30 hours per week during that time, the employee is considered full time for purposes of the ACA and would be designated as such during a subsequent “stability period” of between six and 12 months. An administrative period of up to 90 days would be allowed between the look-back and stability periods.

Employees averaging less than 30 hours per week during the measurement period would be considered part time during the stability period.

For staffing firms, the look-back provision helps them make sure the ACA pay-or-play costs only kick in when an employee is truly qualified, rather than being based on expectations at the time of hire.

“We know 99% of our placements are temporary,” says Lefebvre. “It's not very many who meet the non-variable [i.e. full-time] requirement from the onset.”

“A lot of people come and go pretty quickly,” agrees Rick Holden, a managing partner of Maine Staffing Group, which has been in business for 19 years. “That's part of the problem with this whole ACA thing — the uncertainty of this business.”

Leaning toward ‘play’

Although the option of paying a $2,000 penalty in lieu of providing health insurance for each full-time employee holds some appeal — known costs and administrative ease — Holden says Maine Staffing is likely going to take the play option and offer health insurance to employees who meet the ACA's full-time standards.

In the pre-ACA days, he says, Maine Staffing offered health insurance to some employees on a case-by-case basis, taking into consideration their level of experience and particular job skills. He and his partners are still evaluating the cost of extending health care to all eligible employees and are working with a Portland insurance broker to come up with a program that's in compliance with the ACA. He expects the related administrative functions will require the hiring of an additional one or two employees, adding to overhead costs that would be built into the hourly rate the company charges clients.

“I think most of them know it's coming,” he says, “but they may not be terribly eager to pay for it.”

Holden says the decision to provide health insurance for full-time employees entails a lot more than simply determining how many of Maine Staffing's employees qualify. Another looming challenge, he says, will be finding a health insurance provider with a competitive plan for an entirely new market of insured variable-hour workers.

For one thing, he says, it's not a given that every qualified temp worker will accept the insurance coverage, since it will come with premium, out-of-pocket and co-pay costs. Some of the positions filled by Maine Staffing employees, he says, simply don't pay enough for the worker to embrace those extra expenses.

“That's going to be part of the problem for insurance companies: Getting their hands around the question of how many people will take the coverage … getting some kind of [count],” he says. “The other question is the level of participation. It's going to be very difficult for insurance companies to get a price on it.”

Lefebvre shares those concerns, but says Bonney Staffing is hopeful that insurance companies will see the staffing industry as a new market with manageable costs and the likelihood, given current trends, of long-term growth. Notwithstanding the headaches involved, she says most of her colleagues in the Maine Staffing Association are inclined to offer health insurance coverage for their qualified employees.

“But that depends on affordability,” she says. “We see potential here — that it's going to help us provide a health insurance benefit we always wanted to provide.”

Holden, who says he and his two managing partners have probably spent 200 to 300 hours working on ACA-related issues in 2013 and expects “we'll put a lot more into it before we get everything resolved,” is planning to use the one-year reprieve to establish a program that will comply with ACA rules come Jan. 1, 2015.

“At that point, once you start to implement it, you deal with the learning curve issues,” he says. “All of the companies in the Maine Staffing Association have been around for a long time. Like us, they intend to be around a long time further. All of us have the objective of doing things the right way.”

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