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Advice on ACA and Overtime Rules

by Joe Ciccarello, CPA, MST, Managing Partner, Gray, Gray & Gray, LLP

While your focus right now is on delivering heating oil and propane to customers and on keeping their equipment running through the winter, you still have to pay attention to running a business. Two of the most pressing challenges facing small and mid-size business owners today are the looming deadlines for Affordable Care Act (ACA) compliance and the pending changes to overtime regulations.

Here is a status update on these issues.

ACA Compliance

Many oil and propane dealers mistakenly think the Affordable Care Act only affects larger employers. Even some companies with over 50 employees believe that they have more time to comply with ACA provisions that affect them. But larger companies need to be in compliance this year. And for smaller businesses, time is almost up – 2016 is the year they must also comply.

Some issues that have arisen during the first year of ACA compliance include:

Companies with low wage workers and seasonal workers (such as winter-only delivery drivers) are having difficulty finding an insurance carrier who can provide coverage that qualifies as “affordable” for their employees. In some cases it may be less costly for an employer to pay the non-compliance penalties and allow workers to obtain their own insurance through the healthcare marketplace (and perhaps qualify for tax credits).
Employers with more than 50 workers – classified as “large” companies under ACA guidelines – should file their compliance information “in good faith” during this first full year of compliance. The IRS has stated there will be no penalties and that companies will be allowed to file amendments once they have a better handle on their costs and eligibility.
Although small businesses (less than 50 employees) are not required to file ACA compliance documentation until next year, it is essential that you start tracking the information for 2015 in order to establish a baseline and work out details about what you’ll need to file.

Don’t assume your tax preparer, health insurance company or payroll company is automatically keeping you in compliance. While some financial professionals are providing services to help with the extensive documentation and record keeping required by the ACA, not all are doing so. It is best to check directly to make sure the work is being done. The best place to start is by contacting your payroll company to confirm they not only have the information you need to file, but are prepared to handle the filing process for you.

Overtime Changes

In the summer of 2015 the Department of Labor (DOL) announced plans to raise the salary threshold that exempts a worker from being paid overtime wages when they work more than 40 hours per week. Currently that threshold is $455 per week, or $23,660 per year. Anyone making more than that is exempt from overtime pay.

The DOL’s proposed rules would significantly increase that threshold to $970 per week ($50,440 per year). That would make a huge number of currently exempt salaried employees eligible to receive overtime compensation. The new rules also raise the threshold for “highly compensated” employees from $100,000 to $122,148. These thresholds would increase automatically in the future, at a rate tied to the Consumer Price Index.

This change will affect millions of workers. Estimates are that 8 percent of the American workforce today falls under the $455 per week threshold. Under the new levels, 40 percent of all workers will become eligible for overtime wages. The DOL estimates it will cost employers over $1 billion per year in overtime wages.

Right now the new rules will still exempt legitimate executive, administrative, professional, computer or outside sales personnel, although the DOL may institute new tests to guard against misclassification, requiring “white collar” workers to spend more than 50 percent of their time performing exempt duties in order to remain exempt from overtime.

The good news is that, following the comment period on the proposed rules (during with the DOL received some 270,000 comments!) the DOL has announced that it is likely to push back implementation from this year until 2017, although a firm date has not been announced.

If you have salaried employees who may fall within the new threshold, there are several steps you can take to minimize the impact on your payroll budget.

Reduce workers’ hours to less than 40 hours per week
Lower hourly pay rates, which will help reduce the “time-and-a-half” rate required for overtime
Cut some employee bonuses and benefits (which are not part of the calculation of wages) to increase base salaries above the new threshold.

Be Prepared with the Facts

While it is important to be aware of what is happening with ACA and overtime rules, it is critical that you take steps well in advance to prepare your business. If you have questions about your company’s ACA filing status or about the kind of information you need to track and report, or if you are concerned about which of your employees will be affected by the new overtime guidelines, please contact Gray, Gray & Gray at (781) 407-0300 for more information.

2016