Staffing Firms Helping Big and Small Manufacturers Survive the ACA

October 31, 2013

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The health care mandates under the Affordable Care Act (ACA) have posed a challenge for small manufacturing businesses that look to or are hoping to expand. In response, many staffing firms are stepping up to offer specialized services that can help the businesses save money while complying with the law. 

Under the ACA, if a company that has fewer than 50 full-time employees hires additional full-time help, it will then have to buy coverage for all full-time employees in the company. That can become expensive.

Rodger Garner, general manager for Source Group Professionals Inc., a boutique staffing agency with 75 employees in Tucson, Ariz., told IMT there is a way to mitigate the impact of that part of the ACA law.

For example, if a company that had 49 employees needed to gear up for new business by adding five more workers, it could utilize his staffing firm to act as employer of record and thereby avoid paying health care benefits to any of the employees, he said.

The company would still have to pay a premium to his agency for administrating those new hires, and even more if the new workers are provided benefits, but they do not have to accommodate their original in-house workers if they number under 50, Garner said.

Kim Megonegal, chairman of Kimco Staffing Services, a California-based staffing firm that caters to many industries, including manufacturing, said he expects to see a lot of new business from companies with about 50 employees.

“Medical benefits are the really complex animal of employing people,” he said.

When ACA passed, it required employers to keep track of employee hours starting Jan. 1, 2013, in order to determine for whom the company would have to buy health benefits at the beginning of 2014. Companies now have until 2015 to look back over their 2014 records.

But the definition of who is a full-time employee is complicated.

“It’s frightening from an employer’s standpoint,” said Megonegal.

The staffing firms don’t route around the law -- they are simply absorbing the impact. With more than 15,000 employees, Kimco is also gearing up to apply the law, which will have had tremendous implications for its business, Megonegal said.

“The rules have been changing every month since it came into being two years ago,” he told IMT. “I go to a seminar once a month on ACA. It scares me to death that we do it right.

“We are so thankful that there is a delay from 2014 to 2015, so hopefully we can get better stabilization [of laws] and definitions that are hard to interpret.”

When ACA originally passed, all employers originally had to keep track of employee hours starting Jan. 1, 2013 in order to determine for whom the company would have to buy health benefits at the beginning of 2014. Now, companies have until 2015 to look back over their 2014 records.

According to Megonegal, nobody has developed a computer program to track employee records as it pertains to the ACA law -- neither government nor insurance companies -- so Kimco is adding staff specifically for that task.

Because the rules are complicated, smaller firms would be more inclined to use a staffing firm to track compliance rather than worry about how to handle the task, said Edward Lenz, senior counsel for the American Staffing Association (ASA).

The association worked with Congress and the administration before the ACA passed in March of 2010 as a member of a coalition called Employers for Flexibility in Health Care (EFLEX).

EFLEX includes some of the largest businesses and trade associations representing retail, construction, hospitality, restaurants, and others, with a primary focus on the unique impact of the ACA on employers of part time, temporary, and seasonal workers.

Lenz explained to IMT that if a company has a properly classified, variable-hour employee at the start of employment, it can wait up to 12 months to look back and determine whether that person was full-time during that period.

If that employee’s hours add up to over 1,550 hours, then going forward that employer would have to offer a health plan or pay a penalty during the ensuing 12 months.

That is a difficult exercise to calculate for the small manufacturing firm and it is also difficult for the staffing firm, given the nature of the staffing business.

Most staffing firms place thousands or even tens of thousands of people in jobs in which neither the staffing firm nor their clients can reasonably predict how long those individuals are going to be needed.

Lenz pointed out the ACA is a work in progress. “ASA and the coalition are committed to trying to make it work and are interested in making changes to the law,” he said.

For example, they are working to alter the definition of who is full time from 30 hours per week to a higher number that better reflects what most employers view as full time.

Megonegal sees this as an opportunity for a lot of staffing companies to jump in.

“For your readers, I would sure make sure they are with a very reputable staffing company that’s going to stand behind what they are doing,” he said.

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