Nonprofits are not off the hook when it comes to ACA compliance. Here’s why.
How often do nonprofits think about the Affordable Care Act (ACA)? The answer is not very often.
This is a problem – especially if you happen to become an applicable large employer (ALE) without even realizing it.
Many nonprofits hire paid interns. While you might not consider these individuals full-time employees, their internal status makes no difference to the IRS. Anyone who’s paid for hours worked is a variable-hour employee. And if these individuals work at least 30 hours per week, then in the eyes of the IRS, they are considered full-time equivalent employees.
Nonprofits cannot distinguish employees based on their own policies and regulations. You still fall under the same ACA umbrella as all businesses in the United States regardless of how much – or how little – you pay your employees.
As a result, nonprofits must still comply with ACA regulations like everyone else.
What should you be doing to prepare for ACA reporting deadlines? What are some of the biggest challenges you may face in regard to ACA compliance? Here’s what all nonprofits need to know.
The difference between full-time and variable hour employees
Employee designation can be a slippery subject at nonprofits. Many organizations want to know what equals full time and what equals variable hour.
A full-time employee is anyone who – at the point of hire – is given a full-time position, regardless of hours worked. You’re required to offer health care to these individuals under the ACA. Everyone else is considered a variable-hour employee.
Variable-hour employees work inconsistent hours. As a result, employers have a difficult time determining – at the beginning of their employment – if they’ll eventually work the hours needed to be considered a full-time employee.
Most of the time, nonprofit workers are variable-hour employees. That means you must consistently track your employees to ensure ACA compliance. You must determine what employee measurement period to use, and apply it to every employee at the organization.
How to ensure proper calculations
Most nonprofits don’t have complicated EIN structures, but their internal makeup can get a bit complex.
For example, in some nonprofits, employees aren’t paid by the hour, yet the organization is still automatically paying their health benefits. These individuals might not be making a salary, but because they are receiving health care, you have to track the hours they work. Priests tend to fall under this category.
This is a good reminder to ensure you’re doing the proper calculations for all of your employees and that you’re tracking them correctly. This includes making sure you’re giving employees the right designation.
For example, say you have a salaried employee who works 40 hours a week. You designate that individual as full time and offer them health insurance. Now, let’s say you have a board member who only works on the weekends, yet makes a yearly salary. You might not offer that individual health insurance because they don’t work at least 30 hours per week. However, because they’re getting a yearly salary, you could be on the hook for not offering them coverage.
We can’t stress this enough: Stay on top of tracking your employees’ hours and designating them properly.
Do nonprofits get special treatment from the government?
The answer is no.
The government does not offer any special treatment or exemptions to nonprofits when it comes to the ACA. Therefore, if you’re an ALE, you need to make sure your insurance plans meet ACA requirements.
Oftentimes, nonprofits go with less expensive health care plans. They may meet the standard of minimum essential coverage (MEC), but might not meet the standard of minimum value coverage (or vice versa). This cannot happen.
Whether you’re a for-profit organization or a nonprofit, the steps remain the same: Determine if you’re an ALE, accurately track and calculate your employees’ hours, and offer affordable health care with minimum essential and minimum value coverage.