IRS Annual Reporting for the Healthcare Industry- Part 2
In our last post on IRS reporting and the healthcare industry, we identified the two ways healthcare and senior living communities can define who a full-time employee is by using the Monthly Method or Lookback Method. In this post, we’ll explore how those two methods apply to PRNs and contracted employees.
PRNs typically will fall into clearly full-time or part-time positions under either method. When you have a PRN that wants to transition to fewer hours, however, the situation becomes more complex. Under the Monthly Method, going from full-time to part-time works like you would expect – once they work fewer than 130 hours in a month, you term the coverage, offer COBRA and move on. However, if they start to pick-up up more hours and go back to being full-time, you’ll need to anticipate that and switch them to active coverage again, so they don’t end up being full-time for a month without being offered coverage.
Under the Lookback Method scenario, your status as a full-time or part-time employee doesn’t change during the stability period. For example, a PRN moving to part-time hours won’t be part-time under the rules until after the end of the stability period and, therefore, their coverage will continue through the end of the plan year. Likewise, a part-time PRN in a stability period that begins working full-time hours in a stability period will remain part-time until the end of the plan year and not be eligible for coverage until then. These are not the expected (or logical) results, and that’s where close tracking and training of your HR staff becomes key.
The same issues – and results – apply to contracted employees. Usually, you’ll have more control over a contracted employee’s hours, so the coverage tracking may not be as bad, but you also have an additional question: “Who’s the employer?”
The ACA requires the common-law employer of the employee to offer coverage to all its full-time employees. This is a murky part of the regulations, as “contract” employees can in some scenarios end up being the common-law employees of both the entity that issues the W-2 and the entity employees are performing work for. Both end up having to offer coverage. You may use one method to identify full-time employees, and the agency paying the employees may require you to use a different method. A mismatch that results in employees not being offered coverage who otherwise should have been can result in contractual breaches, as well as liability under the employer mandate for both entities. If utilizing contracted employees, we advise you to review your agreements to make sure this issue is covered in detail and both parties are comfortable with the arrangements.
As with everything related to the ACA, the details are very important and this blog series is only a summary of some of the issues involved in reporting. Proper tracking and reporting is your only protection against heavy fees under the ACA. If you have any questions or concerns, or haven’t yet reviewed your processes in detail, don’t hesitate to reach out to a member of the ‘A’ Team.
- IRS Annual Reporting and the Healthcare Industry - Part 1
- The IRS Reporting Dilemma
- Compliance Support Page
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