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ACA Compliance

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Businessman at Desk IRS Filing Deadline June 30

Employers should take action to comply with Affordable Care Act reporting deadlines and new Fair Labor Standards Act rules on the horizon.

Employer strategies

How to Prepare for Health Reform Reporting and New Employment Law Rules

  • 3/1/2016


Affordable Care Act implementation requirements

Understanding the 2016 changes in labor and employment laws and their effect on your business can be put into two groupings: short term and mid-term. In the short term are the Affordable Care Act reporting requirements. The extended filing deadlines are fast approaching for employers and other coverage providers. The new due dates are as follows:

The FLSA salary level changes could significantly affect employers' labor costs.
  • March 31, 2016, (extended from February 1) for forms or statements that must be provided to individuals (1095-B/1095-C)
  • May 31, 2016, (extended from February 29) for forms not electronically filed that must be provided to the IRS (1094-B/1094-C and 1095-B/1095-C)
  • June 30, 2016, (extended from March 31) for electronically filed forms that must be provided to the IRS (1094-B/1094-C and 1095-B/1095-C)

The reporting requirements can be confusing, and there are many vendors offering reporting services to employers. If you need assistance, get help with your ACA reporting so that you meet the upcoming reporting deadlines. Then, work to integrate reporting into your 2016 workforce planning to ensure your business is ready for next year’s filing deadline.

Salary level requirements changing under proposed Fair Labor Standard Act update

A lot of buzz has surrounded proposed changes to the Fair Labor Standard Act (FLSA), which establishes minimum wage and overtime compensation requirements for employers. The proposed ruling affects the salary threshold on who qualifies for an exemption under FLSA, and is expected to be approved sometime in mid- to late 2016.

Overtime exemption

In order for someone to be exempt from overtime pay they must meet ALL three of the tests as defined under FLSA.

  1. The salary level test requires a minimum amount of compensation to be paid to exempt employees.
  2. The salary basis test dictates how exempt employees must be paid.
  3. The job duties test defines the primary job duties required to be classified as exempt from overtime.

Job duties test for FLSA exemption

To be exempt from FLSA, employees must fit into one of the exemption categories: executive, administrative, or professional (often referred to as “white collar” exemptions), or outside sales, certain computer employees, and those who are highly-compensated.

Currently, the minimum salary level requirement for an exempt employee is $455 per week or $23,660 annually. The new proposed rules for overtime exemption would substantially change the salary level requirements for white collar and highly-compensated exemptions.

The new regulation would raise the weekly salary to $970 or $50,440 annually, and increase the highly-compensated employee salary level from $100,000 to $122,148 annually. The proposal would also implement a prescribed formula to automatically increase salary levels on an annual basis to keep salaries aligned with inflation without major legislative involvement.

Preparing your business for wage changes

These salary level changes could cause substantial hardships for employers as it relates to labor costs. But reviewing your workforce classifications can help you plan for the update and reduce the impact. Here are some steps to consider when planning for the proposed 2016 and 2017 labor cost increase.

  1. Start requiring all employees (even exempt) to record their actual hours worked now. This could provide you with insight into the amount of hours exempt employees are currently working. If a position is transitioned to non-exempt, you will have data available to help determine the amount of overtime to budget or to help determine new compensation.
  2. Assess your company’s current exempt positions by focusing on positions that meet the white collar exemption earning between $23,660 – $50,440. If your business employs highly-compensated individuals, include these positions in your analysis.
  3. Ensure job functions meet the criteria for exemption under the job duties test and update job descriptions accordingly. Remember to focus on the duties and position — NOT the person.
  4. Consider the labor cost implications to your organization if you keep positions exempt at the new salary level of $50,440. Compare those figures to the numbers if you transitioned current exempt positions to non-exempt (which requires overtime compensation). If exempt positions are transitioned to non-exempt consider how the new hourly rate will be determined.
  5. If employee benefit offerings are different based on exempt or non-exempt status, and you decide to transition current exempt positions to non-exempt, you will want to review and update benefit programs. Develop a compensation and benefits communication plan if you make changes.
  6. Ensure your organization has a well-documented timekeeping policy including how overtime is calculated and approved.
  7. Also consider the administrative costs such as time to prepare and process payroll.
  8. And lastly, think about how the changes you are considering will affect employee morale or increase turnover.

One final thing to remember: this proposal was suggested under the current administration. The upcoming presidential election could weigh heavily on the final outcome. Business owners should continue to monitor this Department of Labor proposal and be prepared to take swift action if final approval is confirmed.

How we can help

As business owners, you don’t have to be an expert on these laws, but you do need to have a broad knowledge and understanding of how they affect your organization. CliftonLarsonAllen’s team of HR consultants can help you with questions and concerns and help you address a variety of compliance issues.