Ancient tomes often guide modern times. For example, the 2,000-year-old military treatiseThe Art of War, attributed to the Chinese general-philosopher Sun Tzu, is cited regularly in contemporary political thinking, business tactics and legal strategies.
Sun Tzu regarded war as a last resort but also understood that it could not always be avoided. His principles for both eschewing conflict and conducting armies in the event they were needed on a battlefield continue to resonate powerfully among many decision-makers to this day.
Indeed, preparing for every contingency—a central tenet of Sun Tzu’s overarching doctrine—can be adopted in a variety of circumstances, particularly when complying with complex new regulatory frameworks.
For some business leaders and their legal counsel, making sense of rules implementing the Patient Protection and Affordable Care Act (ACA)—a.k.a. “Obamacare”—is one of those occasions when invoking Sun Tzu’s sage advice seems appropriate.
Under the ACA, compliance is not an option. So, as in war, employers should be prepared for anything.
As a critical first step, employers need to tally their troops. The ACA sets out responsibilities based on the number of employees in an organization, in addition to new reporting requirements under Tax Code Section 6055.
Responding to those responsibilities and requirements necessitates knowing not only a head count of employees but also how many hours those individuals work and how many full-time-equivalent employees the company has under the law. To that end, employers must track actual employee hours that fall under the Fair Labor Standards Act.
Like deciding which side of a battle they are on, employers must initially determine where they stand as defined by their employee information. It will then be clear whether they are subject to penalties or qualify for a credit, and how they can count employees in relation to other rules.
One of the core provisions of the ACA is the employer shared responsibility mandate—also known as “pay or play”—which requires organizations with more than 50 full-time employees to provide coverage or risk paying a penalty. Like much of the ACA, the requirement and penalties can be difficult to decipher. Moreover, timelines for compliance are shifting.
It’s essential for employers to determine employee designations. Employers should also be aware of the differences between coverage penalties and the options for transition relief that currently exist. When that is done, it is possible to make a calculated guess concerning how much it would cost per employee to either pay the penalty or provide coverage.
For all the uncertainty and strong opinion surrounding the ACA during its brief existence, one fact remains: the changes it brings are likely to become embedded in the fabric of American life. Indeed, according to the Pew Research Center, even the legislation’s majority of opponents now want to see Obamacare work.
Still, no one can predict how the law or its regulations may change or if costs will rise or fall over time. What employers need to combat this uncertainty is information and knowledge.
Pay or play under the ACA? Either way, the key to a winning strategy for compliance starts with tallying the troops and understanding employer responsibilities as an essential foundation for weighing options.
Information and insights gathered now will help employers prepare for whatever lies ahead.
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