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Small Business Employee Benefits and HR Blog

How to Count Employees When Offering a Group Health Plan

When a company offers a group health plan, there are many laws and regulationsHow to Count Employees When Offering a Group Health Plan that come into play. To determine which particular regulations, fees and penalties apply in each situation, a company must make an accurate employee count. The complicating factor is that these laws have different methods for counting employees. In this article, a summary of employee counting rules by Benefits Pro, we outline when key health plan regulations come into effect and how businesses can determine if they meet minimum company size requirements.

Companies With 15 or More Employees

Two major regulations apply at this company size. In order to determine if a business is subject to these laws, a company must count those employees working 20 or more calendar weeks in the current or previous calendar year; each part-time and full-time employee is to be counted as one. A company’s noncompliance may lead to a suit by the Equal Employment Opportunity Commission (EEOC) or by a harmed individual. The applicable regulations are:

  1. Title VII of the Civil Rights Act. Under Title VII of the Civil Rights Act, when determining health plan coverage eligibility, amounts or charges for employee benefits, a company is not permitted to take into consideration the employee’s race, color, sex, sexual orientation, national origin, religion or pregnancy status. The company is also prohibited from denying coverage for a condition or treatment that disproportionately affects one of these protected groups.
  2. The Americans with Disabilities Act (ADA). The ADA prohibits companies from denying disabled individuals equal access to insurance coverage and proscribes employers from requiring a disabled person to have insurance terms and conditions distinct from other employees.

Companies With 20 or More Employees

When a company reaches 20 or more employees, a number of regulations begin to apply. Those that require companies to count employees working at least 20 calendar weeks in the current or previous calendar year, with both full-time and part-time employees counting as one are:

  1. The Genetic Information Nondisclosure Act (GINA). Under the GINA, a company’s group plan cannot discriminate against persons based on genetic information. Genetic information cannot be used for underwriting or calculating premium costs.
  2. The Age Discrimination in Employment Act (ADEA). ADEA provides that companies may not offer different benefits for younger employees than they do for employees age 40 or older.

Medicare Secondary Payer (MSP) rules have similar provisions for counting employees. A company must count employees on each working day for at least 20 weeks in either the current or previous calendar year. This 20-week test must be performed at the time that the person receives the services for which he or she claims the Medicare benefits. Both full-time and part-time employees are to be counted as one.

MSP comes into effect for individuals age 65 and older if the group health coverage is provided on account of the person’s — or his or her spouse’s — employment status. MSP states that the group health plan must be the primary payer and Medicare the secondary payer. If a company does not adhere to these rules, Medicare may collect erroneous claim payments from the employer.

COBRA, which gives the right to temporary health insurance coverage at group rates to specific persons, such as former employees or dependent children, has more complicated qualifying guidelines. To assess if a business is subject to COBRA regulations, a company must count employees of all commonly owned businesses on more than 50 percent of the typical business days in the preceding calendar year. While full-time employees count as one, part-time employees count only as a fraction, with the numerator equal to hours worked by the employee and the denominator equal to hours that must be worked in a typical business day for full-time employment. If companies do not adhere to COBRA’s provisions, they may be assessed excise taxes and statutory penalties and/or be subject to private suits filed by qualified beneficiaries.

Companies With 50 or More Employees

Two significant rules come into effect when a company reaches 50 employees.

The Family and Medical Leave Act (FMLA) states that businesses who provide group health plans must provide those benefits to any employee who is on FMLA leave. Employers must count employees who have worked 20 or more weeks in either the current or previous calendar year, within a 75-mile radius of the relevant employment location. A company must count each full-time and part-time employee as one, and non-adherence can lead to an EEOC action and/or a private suit by an individual.

The Affordable Care Act (ACA) contains provisions relating to Applicable Large Employers (ALE). It states that ALEs must offer affordable coverage that gives minimum value to their full-time employees. If they provide the coverage, they must also report it to the IRS and in a statement to their employees. The employer must count as one both full-time employees (meaning those who work 30 or more hours per week, determined monthly) and FTE employees. The employer should total part-time hours, which should be no greater than 120 hours per employee, then divide that number by 120 to determine FTEs. Penalties are assessed for noncompliance.

Conclusion

With a multitude of rules and regulations surrounding the counting of employees for group health plans, ensuring compliance can be simultaneously confusing and daunting. Learning how key regulations define number of employees will help businesses remain compliant with their group health plan.

Have you ever had problems counting employees or determining if your company is subject to the regulations discussed above? Let us know in the comments below.

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