2013 is Here: Time to Begin Counting Employees

 

On December 28, 2012, the IRS and the U.S. Treasury Department issued a Notice of Proposed Rulemaking (“Notice”) to announce how a company may determine whether it is a “large employer” subject to Affordable Care Act penalties if at least 95 percent of its full-time employees are not offered affordable health care coverage beginning January 1, 2014.

For the purpose of determining whether a person is an employee, the Notice states that an employee is one who is subject to the will and control of the employer not only as to what shall be done but how it shall be done. It is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if the employer has the right to do so.

A full-time employee is one that works at least 30 hours per week. Full-time equivalents are calculated by adding part –time and full-time employees as follows: 40 full-time employees employed 30 or more hours per week on average plus 20 half- time employees employed 15 hours per week on average are equivalent to 50 full-time employees. The proposed regulations address how to determine the average number of employees for a year, such as how to count salaried employees or seasonal workers.  A frequently asked questions publication issued by the IRS on the same day explains how the penalties will be calculated and collected.

Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year.  The IRS informed the public that for 2013, an employer may measure using any six-consecutive-month period in 2013, and it suggested that a company could use the period from January 1, 2013, through June 30, 2013 for measurement, so that it has time to analyze the results and make changes before 2014.

Employers will not be able to avoid the penalties by assigning employees to separate companies with related ownership. The IRS notes that companies that have a common owner or are otherwise related generally are combined together for purposes of determining whether or not the aggregate group constitutes a large employer. The IRS also intends to issue regulations to prevent employers from using leasing companies or other entities to skirt the requirements.

Although the rule is not final, the Notice states that employers may rely on the proposed regulations for purposes of compliance with the Employer Shared Responsibility provisions. If the final rules are more restrictive, employers will be given additional time to come into compliance. Comments on the proposed regulations are due by March 18, 2013.

Is Your Compliance Program Starting to Rust?

A legally sufficient compliance program is like an expensive sports car:  It does you no good sitting in the driveway. It must be driven regularly to realize its value. If your company’s compliance plan has been sitting idle, it is time for a tune-up. Using governmental corporate integrity agreements (CIAs) as a guide, these steps will put your compliance plan in motion:

1. Designate a compliance officer and compliance committee  The compliance officer (CO) should be a member of senior management reporting directly to the chief executive officer. The CO should report compliance matters directly to the board of directors (“Board”) at least quarterly and should be encouraged to report compliance matters to the Board at any time. Job responsibilities unrelated to compliance must not interfere with the CO’s ability to perform compliance responsibilities. The CO should chair the company-wide compliance committee, which should meet no less than quarterly.

2. Develop written standards and policies.  
 The organization’s code of conduct must be pro- vided to all employees. Policies and procedures should be developed to address the Anti-Kickback Statute and other laws related to governmental health care programs.  Policies should include sanctions for non-compliance and compliance criteria for performance reviews.  All personnel should regularly be made aware of these policies.

3. Implement a comprehensive employee training program.  All employees should receive a minimum of one hour of compliance training each year, and employees that deal with legal arrangements should receive an additional three hours of training annually, including training on (a) arrangements that may implicate the Anti-Kickback Statute (AKS) or other fraud and abuse laws, (b) policies and procedures relating to legal arrangements, including the tracking system, internal review and approval process, and tracking remuneration to and from sources of business or referrals, (c) the individual’s responsibility to know the applicable legal requirements and policies and procedures, (d) the legal sanctions under the AKS; and (e) examples of violations.

4. Retain an independent review organization to conduct annual reviews.  The organization should engage a qualified individual or an accounting, auditing, law, or consulting firm to perform a comprehensive annual review, including data privacy and security and quality assessments.

5. Establish a confidential disclosure program.  The organization should establish a telephone hotline to allow anonymous reporting of issues believed to be potential violations of criminal, civil, or administrative laws.  The hotline number should be publicized to all employees.

6. Restrict employment of ineligible persons.  Prior to hiring, and as part of the contracting process, the organization should screen all prospective employees and contractors against the federal program exclusion lists. Policies should require employees, agents and contractors to disclose immediately any debarment, exclusion, suspension, or other event that makes that makes that person ineligible to participate in governmental health care programs.

7. Record reportable events and self-disclosures.  The CO should maintain a log of reportable events and self-disclosures that includes the status of the internal review or root cause analysis and any corrective action taken. The CO should ensure self-reporting of violations.

8. Provide annual reports to the board on the status of the entity’s compliance activities.  The board should meet at least quarterly to review reports, oversee the compliance program and evaluate the performance of the CO and compliance committee. Each year, the board should review the IRO report to determine risk areas. Training programs, policies and procedures should be revised annually to address risk areas. Once the compliance program has received a tune-up, it is ready to move forward with its compliance program.