Avoiding the Sting of Obamacare

When the Patient Protection and Affordable Care Act (ACA; also known as Obamacare) is fully implemented at the start of 2014, it will likely impact how most banks staff their branches. Although the mandates regarding the ACA are clear, the rules surrounding it are confusing, at best.

Bank management may have heard that the ACA will require banks of a certain size to provide “affordable” health care coverage to their full-time employees or face punitive, federally imposed excise taxes – officially called the Employer Shared Responsibility Payment; referred to here as “penalties.” However, they may not understand upon what metrics the decision is based and they may also be unaware that, for the purposes of the ACA, many employees formerly considered “part-time” by bank management will now be deemed full-time employees.

With part-time employees playing an increased role in most staffing scenarios, banks need to develop a strategy to carefully manage the scheduling of these employees to prevent, or at least minimize, costly government penalties.

From Part Time to Full Time

Under the ACA, employers that have 50 or more full-time equivalent (FTE) employees must offer affordable, minimum essential coverage to full-time employees or face the possibility of penalties. Full-time employees are defined as those working an average of over 130 hours per month, the equivalent of 30 hours a week. Many banks have employees working 30 or more hours a week they currently classify as part-time. This internal classification has been rendered irrelevant by the ACA. For employees that work 30 hours or more per week, on average, banks that meet the thresholds set by the ACA must make benefits available to those employees or face possible penalties.

Historically, it has not been necessary for recruitment and retention purposes to offer health benefits to part-time employees, a perk typically reserved for full-time employees. As a result, a significant majority of firms do not offer these workers health benefits. According to the Henry J. Kaiser Family Foundation, only 28% of firms in 2012 offered health benefits to their part-time employees.

In addition to the blow dealt by the ACA in elevating 30-plus-hours per week workers to full-time status, the ACA requires businesses to include all monthly payroll hours in calculations to determine whether they have 50 full-time employees. Here’s how it works:

  • Each employee working an average of 30 hours a week counts as one FTE, although the ACA gives employers some options regarding calculations for non-hourly and seasonal workers that are beyond the scope of this article.
  • For the remainder of employees (those working fewer than 30 hours a week, on average), employers must total cumulative hours and then divide the monthly total by 120 to see how many non-full-time FTE employees they have.
  • If the average number of FTE employees combined is 50 or greater, employers may be subject to penalties if they choose not to provide affordable health care coverage for those employees who average 30 or more hours per week.

For example, if a bank has 30 employees working 30-plus hours per week, on average, and 35 part-time employees that work 730 hours a month, on average, the bank has 50.85 FTE employees and is subject to the guidance of the ACA.

If your bank is very small (25 or fewer FTE workers) and the annual average wage (all employees) is below $50,000, it may also be eligible for a Small Business Health Care Tax Credit that can offset some of the expense of health care coverage for part-time employees, should you choose to offer it. However, at press time, the sequestration caused by Congress’ failure to pass new federal budget legislation was affecting many tax credits, including this one. Before you take any tax credits for health care insurance (or other expenditures), consult with a tax professional.

Furthermore, the ACA offers two additional provisions designed to help lower-income earners afford minimum essential insurance. These will help your part-time employees afford coverage (a requirement beginning in 2014) and help offset the income loss, if you decide to schedule them below a 29-hour threshold. The Kaiser Foundation offers an excellent summary of these provisions  along with a calculator to help workers determine their potential expenses and benefits.

Scheduling for Compliance

Now that you know more about the ACA and how it affects your company, you may be rethinking your scheduling strategies. Many business and labor experts are postulating that companies will reduce employee hours, especially for those who work part-time, to avoid topping the 50 FTE mark and to keep their part-time employees under the 30 hours per week threshold.

Some experts have suggested employers could largely skirt the ACA by scheduling all part-timers for 29 or fewer hours per week. This will exempt employers from having to offer coverage for those employees. Banks that exceed the 50 FTE count will still need to provide access to affordable care (or potentially face penalties) for full-time employees (30+ hours), but proactive schedule management can keep that number to a minimum. Small banks that hover around the 50 FTE mark, on average, may be able to use schedule management to stay under that threshold and be exempted from the ACA’s requirements altogether.

Nevertheless, in both these instances, the service demands of the branches must take precedence over ACA concerns in order to ensure a bank’s long-term health. Precise scheduling to actual need, combined with proactive management of the total hourly load to minimize the potential impact of excess labor expenses and penalties, is the strategy we recommend. Many banks may find that scheduling staff to both satisfy customer needs and minimize the impact of the ACA provisions will be very difficult. Those that have some form of technology-based scheduling system will have a leg up on the process.

Using a solution that harvests historic transaction data and makes scheduling recommendations based on that data would enable branches to establish scheduling parameters for employees with 29 or fewer hours per week but then have the scheduling engine allocate those hours to provide optimal staffing for busy periods. These solutions can also generate historical reports and perform the accurate calculations required for the ACA’s averaging strategies and warn branch management when scheduling parameters are endangering the bank’s ability to meet forecasted demand.

There is little doubt that the ACA will require many banks to make staffing adjustments, increase the automation and precision of their scheduling and perform more robust reporting and recordkeeping regarding their employees. The “rule book” for this act is still under development, so we recommend banks keep tabs on breaking news throughout 2013 and beyond. An excellent document from the IRS outlines in more detail most of the proposed or final regulations discussed here.

Given that the ACA requires employers to use historical data from 2013 to calculate totals for the initial period, banks that begin proactively scheduling now, rather than waiting until the program requirements kick in at the start of 2014, can position themselves and their branches for the least possible impact. Developing a clear plan and implementing the technology to enable accurate, precise scheduling and reporting are the first steps toward this goal.

Mr. Scott is President/CEO of Alpharetta, Ga.-based Financial Management Solutions, Inc. (FMSI), which provides financial institutions with business intelligence and performance management systems for efficient branch staff scheduling and lobby management. He can be reached at [email protected].