Growing your business to 50 employees is a great accomplishment, one that you’ve undoubtedly worked long and hard for and should be celebrated. As a mid-sized business, your company has outgrown its start-up struggles, but now faces a whole new set of HR challenges, including compliance with different employment laws.
Businesses with 50 or more full-time employees, or full-time equivalents, are looked at differently by the federal government than those with 10 or 15 employees. This can make human resources management a bit more complex.
As your business approaches the 50-employee threshold, be aware of compliance changes under the Affordable Care Act, Family and Medical Leave Act, and the Equal Employment Opportunity Commission.
Some provisions under the ACA only apply to applicable large employers (ALE), those with 50 or more full-time or full-time equivalent employees.
The ACA requires employers to provide health insurance to their full-time employees and their dependents. What’s more, the coverage must comply with the employer-shared responsibility provisions of the ACA which work to encourage employers to offer affordable health insurance to their employees that provide “minimum value.” Read more about employer-shared responsibility provisions here >>
To avoid penalties, employers with 50 or more employees must cover enough of the monthly premium costs for their company-provided health insurance to keep workers’ contributions below the maximum amount allowed by the ACA. Find out more in this blog post >>
There are three methods that determine affordability using the shared-responsibility affordability percentage which is determined by the IRS and has been set at 9.12% for 2023, down from the 2022 limit of 9.61%.
Health insurance coverage will satisfy the affordability requirement if the lowest-cost self-only coverage option available to employees does not exceed 9.12% of an employee’s household income. This adjusted rate is on a "plan year" basis, not a yearly basis.
There are three safe harbor methods to calculate affordability to ensure your plan meets ACA requirements. According to the IRS, an ALE may choose to use one safe harbor for all of its employees or to use different safe harbors for employees in different categories.
For the latter, categories must be reasonable. Additionally, one safe harbor can be used by the employer on a uniform and consistent basis for all employees in a particular category.
Rate of Pay Safe Harbor
When using the rate of pay, multiply the employee’s monthly salary by 9.12% (for the 2023 plan year) to determine the maximum monthly amount that can be taken from the employee’s wages each month for health insurance.
For hourly employees, assume 130 hours are worked each month and then use the lower figure of these two calculations to determine the maximum monthly amount allowed to be taken from the employee’s wages for health insurance:
Employee hourly rate of pay on the first day of the plan year times 130 hours. Then multiply by 9.12%.
Employee's lowest hourly pay rate during the calendar month times 130 hours. Then multiply by 9.12%.
W-2 Form Safe Harbor
To determine affordability using the W-2 method, take an employee’s W-2 wages for the month and multiply by 9.12%.
The result defines the monthly maximum your business could take from the employee’s wages each month to pay for a minimally qualifying health plan. W-2 wages for the entire or part of a calendar year may be used.
Federal Poverty Line Safe Harbor
The simplest method of the three is the Federal Poverty Line method. According to the IRS, for the 2023 plan year, businesses will need to calculate 9.12% of the one-person household federal poverty figure for the previous year and divide that number by 12 to get the monthly employee premium.
As long as your business offers a plan that costs less than that for employee-only coverage, you meet ACA affordability criteria.
For example, the Federal Poverty Line for a one-person household for 2022 coverage was $13,590. Multiply this figure by 9.12% and then divide by 12 to get the maximum monthly amount. Using this safe harbor, an employee's premium payment in 2023 can't exceed $103.28 per month.
However, once your business reaches 50 or more employees and has $50,000 in federal contracts, it must have a written affirmative action plan which clearly states which policies are in place at your organization to ensure compliance with anti-discrimination laws.
Additionally, businesses with 50 or more employees and $50,000 in government contracts must complete and file an annual EEO-1 Report. The EEO-1 Report is mandated by federal statute and regulations and collects employment data from businesses on race, ethnicity, gender and job category.
The DOL administers and enforces over 180 federal laws protecting U.S. workers. Additionally, each state has its own set of employment laws. Employers must comply with both federal and state laws. Contact your experienced human resources consultant at Axcet HR Solutions to see if additional state laws in Missouri and Kansas will impact your business once you hit the 50-employee mark.