Archive for category: Compliance

Are Dental Hygienists Exempt?

If you misclassify your employees, not only will you owe back wages, you will also have to pay back taxes and penalties on each quarter the employee was misclassified. You could owe even more if it was proven that you intentionally misclassified the employee.


Not sure what the difference is between exempt and non-exempt? Check out this video: Exempt vs. Non-Exempt


How big of a problem are employee misclassifications in the dental community?

Let’s take a look at a recent situation with one of our clients.


I sat down in front of the entire office. There were about nine employees in total and there was one thing that was obvious before the meeting started. They were mad. Really mad.


“I haven’t punched a clock in 20 years.” she told me.


Another employee just flat out told me I was wrong and that her husband told her they classify as exempt. She was very upset.


We reviewed the classifications of the staff and determined that none of them were properly classified. The front desk, the assistants, hygienists, all improperly classified. They were all classified as exempt and making a salary, and they should have been non-exempt.


When we helped the dentist explain this, they were not happy. Fast forward three months and they were all very happy. Why? Because if they put in some extra hours, they made some more money. They were salaried at the assumption of 32 hours a week before and would now stay and work for 35 to 40 hours a week to get a few extra bucks, not including potential for overtime.

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Misclassifying an employee as exempt

Employers often think that if you pay someone a salary, or they have a certain title, they qualify as exempt from overtime and minimum wage. This is not true. Exemptions are determined by both the duties of the job and the salary test.


Dental practices seem to really struggle with this. Sometimes practices will try to lump everyone into the “administrative” exemption because they think they perform duties that are of great significance to the business.


The tricky part here is determining if that employee exercises discretion and judgement to matters of significance. Do they have decision making authority, or do they do the job as you tell them to do it?


Are dental hygienists exempt?

Many employers try to claim that hygienists are exempt under the “professional” exemption. While this is true in some cases, this is not always the case. Under federal regulations, only hygienists who have completed four academic years of study in an accredited school approved by the American Dental Association potentially qualify for the exemption.


The hygienist would also have to be paid on a salary basis and receive at least $455 per week to meet the salary test portion of the white collar exemptions.


The question “are dental hygienists exempt?” is not always a simple black and white answer.


Why is this such a common mistake?


It’s easier to pay them a salary

If you want to pay a salary, you can. You can pay your people as salaried, non-exempt. This means that as long as they don’t make below minimum wage for their hours, and they agree to the rate, you can pay them the salary, You still have to track their hours, though. You can use our online timekeeping system if you need help.


My employees like it better

The reality is that while you might get audited and get “popped” for having employees misclassified, it is entirely more likely that one of your employees will turn you in when they realize they are not properly classified.


“But, Matt, my employees love me!”


Until they don’t.


There have been a number of headlines lately about the DOL Wage and Hour Division (WHD) hiring auditors in droves to enforce the Fair Labor Standards Act (FLSA) exempt status classification, but the reality is that people get turned in every day by their employees for improper classifications.


Improperly classifying employees leaves you exposed to issues that you just don’t have the time or resources to worry about. Take the time to determine the proper classification for your employees and pay them accordingly. You can download a free FLSA Classification Checklist from our website through this link.


How to Fire Someone with Dignity

The Bozo Explosion. It’s what Steve Jobs described when he discussed hiring “real” managers during Apple’s explosive growth phase.

Jobs said that when you hire a “B” player, they will hire another “B” or “C” because they are too insecure to hire “A” players. Next thing you know, you have a company filled with “B’s” and “C’s”, or a “Bozo Explosion”.

Bad employees can ruin your company. Unfortunately, most people aren’t sure how to fire someone with dignity, so they let bad people stay.

I remember one of my former coworkers who used to wander around all day doing nothing but complaining and distracting others. All he did was talk about the game the night before and complain about management.

Not only was his salary a waste for the company, he took other people off task and killed morale. He was a toxin.

The funny thing is that at least once a week, I talk a client out of firing someone.

Just last week I got a call about a teammate who was “not a good fit”. He went on to tell me about her poor performance and all of the things she does wrong on a consistent basis, and then asked me to prepare termination documentation.

I asked one simple question:

“Is she going to be surprised when you fire her?”

In other words, does she even know her performance is terrible? Has anyone discussed her poor performance and, more importantly, has anyone documented those conversations?

“But, Matt; this is a right to work state!”

Yes, it is also a right to sue state. And, guess who the burden of proof is on?

Bad employees become even worse ex-employees. Most wrongful terminations come from resentment. When someone feels like they have been done wrong, they are more apt to seek revenge.

If you are going to terminate someone, you need to take the proper steps to reduce the risk of wrongful termination claims.

The average legal case against a company with less than 500 employees takes 275 days to resolve and carries a cost of about $125k. Do you have the time and money to not do this right?

Let’s also keep in mind that this is a human being whose world you are about to turn sideways. Whether you are firing your CFO or a drive-through attendant, people work to live. They need their job to support themselves and their family, and it is important to have empathy when you do this. It is important to know what to say when firing someone. Read on to learn more.

How to fire someone with dignity

Eliminate surprises

An employee should never be surprised they are getting fired. I can’t stress how important this is.

You should follow a course of progressive discipline that allows them to “see the writing on the wall” prior to the final cut.

By meeting with someone multiple times about their performance, documenting those conversations, and warning about the possibility of termination, you will substantially limit your exposure to a wrongful termination suit.

You can eliminate most of the concern for this happening by creating a culture of coaching and feedback. Coaching means asking a lot of questions of employees when they do something right or wrong. Don’t give them all the answers, ask and let them find their own solutions.

Document, document, document. Keep all conversations and explanations consistent across all team members. Inconsistent treatment is one of the main reasons lawsuits come about. Consistency is key.

Be prepared

Most people aren’t sure what to say when firing someone, but a little bit of preparation will save you from headaches down the road. It is hard to know what to say when firing someone, but here are some tips.

Walk in to the termination meeting with your script, notes, final paycheck, contact and benefits information in hand. It is also important to clarify how the benefits will work going forward, or who the proper contact is to discuss benefits.

Be concise with your wording and leave emotion out of it. Allow the employee time to compose themselves before they go.

The one piece of advice I give every manager or executive prior to a termination meeting is “shut up!” Once you have said what you need to say; shut up. Don’t get drawn into an emotional conversation.

Think about the logistics of the meeting and how you will handle things after it is over. When and where will you have the meeting? How will you tell the team afterwards?

My suggestion is to have the meeting in a private place and have a witness there. The meeting should last no longer than 15 minutes. Make the reason for termination explicitly clear. Allow them to speak as long as they are respectful.

This meeting is a good opportunity for the employee to get everything off their chest and establish some closure. Make sure it is clear the decision is final.

Finally, don’t ever, EVER, badmouth a former employee to your current team. This will destroy all trust and kill employee engagement. Teammates do not want to follow a leader who they think can turn on them at any moment. Even if the team is crushing the person, don’t join in. Rise above it.

Do it with dignity

Remember that while this is an inconvenience for you, it can be life-changing for the person on the other side of the table. Having to walk out to a room full of your teammates with tears running down your face is the type of memory that makes you want to exact revenge. The keys of how to fire someone with dignity are to put yourself in their shoes.

Have empathy for the person you are firing and do it the right way. Consider severance pay based on your company policy and any other assistance that the situation merits. Do what you can to help the person find a company that is a better fit when it makes sense.

It is never easy when you have to let someone go. Make sure that you are fully prepared to sever the relationship. This doesn’t just mean being prepared for the meeting, it means having all of the documentation in place to protect your organization afterwards as well.

Share some of your stories from terminations that went well (or poorly) in the comments. What would you have done differently if you had it to do over again?


ACA Compliance: How to Complete Form 1095-C and Form 1094-C

I hosted a webinar a few weeks back called “How to Complete Form 1095-C and Form 1094-C” and I asked all of the participants to tell me what their number one concern was with the Affordable Care Act. One of the participants (you know who you are) gave me this gem:


“I have 5,000 concerns about the ACA, it

would be unfair to the other 4,999 to list one first.”


While that is funny, this is a topic that gives a lot of people heartburn. In a recent survey, nearly 50% of executives of companies with more than 50 employees stated they are not adequately prepared for the new reporting regulations.

At ERG, we are all about making things simple. Below is a simple breakdown of how to complete the 1095-C and 1094-C forms along with a few “Frequently Asked Questions.” You can also watch the recording of the webinar where I walk you through these forms line-by-line.

If you have questions about whether you need to complete these reports, how to deal with seasonal employees, or the Employer Mandate in general, this guide is where you will find all of that info.

The information below, combined with this guide to completing the forms, and this video will give you everything you need to prepare and complete forms 1095-C and 1094-C. These resources will give you everything you need to complete the forms.

Disclaimer: I have no opinion or political team when it comes to the ACA, I just deal with the facts.

What is this reporting all about?

The Employer Mandate provision of the Affordable Care Act requires all employers with 50 or more full time equivalent employees (FTE) to offer a certain level of health insurance coverage at an affordable rate to all FTE’s or face a penalty. I am going to share tips specifically for the year end reporting component of this provision, covered under Section 6056, the 1094-C and 1095-C reporting.

Who is Required to Complete the 1094-C and 1095-C?

Applicable Large Employers, generally employers with 50 or more full-time employees (including full-time equivalent employees) in the previous year, must file one or more Form 1094-C and must file a Form 1095-C for each employee who was a full-time employee of the employer for any month of the calendar year. Generally, the employer is required to furnish a copy of the Form 1095-C to the employee.

The best way to think about these forms is the 1094-C is like a W3 (company info) and the 1095-C is like a W2 (employee info). As a reminder, you have to get an additional electronic consent from the employee if you are providing an electronic copy of the 1095-C, the same way you do for the W2.

Transitional Relief for 2015

There is a little bit of Transitional Relief for calendar year 2015 if you fall into one of the following situations:

50-99 FTE’s: There are no penalties for calendar year 2015 reporting if you have between 50 and 99 FTE’s; however, in order to qualify for relief, you must make a good faith effort to accurately report. You also must not have reduced your number of employees to fall into this category.

Offers of Minimum Essential Coverage to at Least 70% of FTE’s: For each calendar month during 2015 an employer has to offer MEC to at least 70 percent of its full-time employees (and their dependents). This requirement will increase to 95% in 2016.

Penalties Start at 80 FTE’s Instead of 30: If you are choosing to “pay” instead of “play,” or you are non-compliant, the penalties will start at 80 FTE’s instead of 30. You can read more about that in the Navigating the Employer Mandate Guide.

Relief Under the Qualifying Offer Method: For 2015 only, if the employer made a qualifying offer to at least 95% of all full-time employees and allowed family members to enroll in the plan (regardless of the cost to employees of family member coverage), the employer will be permitted to use this qualifying offer simple reporting method for all employees, including those who did not receiving a qualifying offer for the entire year.

These are not all of the transitional relief available, but they are the most common. You can read all of the relief methods here.

How to Complete Form 1095-C 

Alright, let’s take a look at the 1095-C. The employee form. This is similar to the W2 in that you will issue it to the employees, but you don’t need to issue it to part-time employees, only FTE’s. Below are a few quick tips that will help you to accurately complete these forms. You can also get our handy cheat sheet for proper codes here.

Part I

In part one you will fill out the employee name, SSN (including the dashes), and address. Make sure the employee address goes in 1-6. Employer info goes in lines 7-13. This needs to match the 1094-C information.

In line 7 it is asking for the legal entity that employs the particular person you are submitting the 1095-C for. If you have three legal entities in your business, just use the one that employs this person.

Line 9 seems simple enough, but when you have corporate structures and multiple addresses, this can get confusing. You can either put the address of the branch, location, or site, or you could put the corporate HQ. Whichever address you choose, it still has to match the 1094-C (once again, think W3 and W2).

Line 10, I recommend you put the telephone number of someone that can promptly reply to any employee inquiry.

Part II

In part two, this is where things get more interesting. I receive questions daily about completing these forms and 95% of them have to deal with lines 14, 15, and 16.

The Plan Start Month may be left blank for tax year 2015 reported in 2016. This was here to accommodate the 2014 tax year. This box is optional for the 2015 Form 1095-C and the employer may leave it blank; it is anticipated that this box will be mandatory for the 2016 Form 1095-C.

Line 14: What, if any medical benefit did you offer the employee? Line 14 only cares about what you offered an employee. Line 14 does not care about your excuses. Line 16 cares about your excuses. You will want to fill in the applicable code for each employee.

Line 14 gets tricky pretty fast because you can’t just write in whatever your health plan is. Instead you have to review a series of codes and identify where you fall as an employer, where the individual recipient falls, and where the medical benefits fall. These codes can be found (and simplified) in this guide.

Once you familiarize yourself with the codes that apply to your company, it will get fairly simple. Most companies will not use more than two codes unless they make major changes to their plans. You can review the codes based on your situation for line 14 in the handy guide.

Once you know the codes, you need to input how long the employee had that particular offer. If they had the offer all year, just add the code to the all 12 months box. If less, add the appropriate code to the appropriate months.

You must enter 1H for any months the employee was not offered coverage by you. This includes months that they were not employed by you.

  • Q: Does someone in a lawful waiting period qualify as having been offered insurance during a month in which the employee was in a waiting period?
  • Answer: NO. Someone in a waiting period did not get an offer of coverage. The reason is irrelevant on line 14.

Line 15: How much did that medical benefit cost the employee if you are claiming it was a qualified health plan? If you use codes 1B, 1C, 1D, or 1E, either in the All 12 Months box or in any of the 12 months, you need to fill this out.

If you enter 1A or 1I in line 14, you must leave 15 blank. If you entered 1G on Line 14, you also do not have to fill out Line 15 or 16 for those months in which you used that code.

Line 15 is asking you to report the employee share of the monthly premium for the lowest cost, self-only minimum value coverage. Line 15 does not care about families or dependents, it is only asking about the self-only employee coverage cost. Line 15 only cares about the lowest cost plan. If you are offering a Gold, Silver, and a Bronze, line 15 only cares about the Bronze. The lowest plan you offer, price to the employee, for self-only coverage.

Line 16: What did the employee do when you offered him or her medical benefits OR what excuse did you have for not offering the employee medical benefits?

On line 16, you will enter the applicable code for one or more months that the following occurred, you can get the codes from this guide.

Sometimes no code will apply here and it is better to leave it blank then put something that is wrong and get audited.

If you buy your insurance from a carrier, you are done!!

Now you just need to do this for every employee. If you are self-insured, you need to fill out Part 3 for all covered individuals.

Part III

In part three, you will complete this section only if you provide employer sponsored coverage or self insured plans.

How to Complete Form 1094-C

Now let’s take a look at Form 1094-C. The 1094-C is very similar to the W3, you will submit one for the entire company.

Part I

The top half of the 1094-C form is fairly straightforward, but I will hit a few key points.

Make sure that on line one you are entering the information for the entity which you are reporting. If you have multiple, you need to submit multiple forms and designate one as the “authoritative transmittal” on line 19.

On line 18, you are completing the number of 1095-C forms with this transmittal. That means that if you have multiple transmittals, you are only putting the number for this transmittal.

This first box on the bottom, number 19, identifies if the form is the Authoritative Transmittal, you will likely be checking this unless you have special circumstances. For example, if an employer intends to file a separate Form 1094-C for each of its two divisions to transmit Forms 1095-C for each division’s full-time employees, one of the Forms 1094-C filed must be designated as the Authoritative Transmittal and report aggregate employer-level data for both divisions, as required in Parts II, III, and IV of Form 1094-C.

Part II

Line 20 is the total number of 1095-C forms that are being filed with this form. This includes any 1095-C’s that are being filed on behalf of the employer.

Line 21, check YES if on any month of the previous calendar year, you were a member of an aggregated ALE, if you check NO, don’t complete part 4.

Line 22 gets a little more complicated.

If you fill out the form regularly, this is called the General Method. If you meet the eligibility requirements for one of the alternate methods; the Qualifying Offer, 98% Offer, or one of the applicable relief methods, you will need to check the appropriate box.

Box A: Qualifying Offer Method- An employer may take advantage of this option if it provides a “qualifying offer” of insurance to any of its full time employees. A qualifying offer is an offer of a bronze level or higher plan where the cost to the employee of employee-only coverage is less than about $1,100 in 2015 (9.5 percent of the Federal Poverty Level). Also, the employer must offer the plan to all members of the employee’s family to be eligible to use this reporting method.

Box B: Qualifying Offer Transition Relief- For 2015 only, if the employer made a qualifying offer to at least 95% of all full-time employees and allowed family members to enroll in the plan (regardless of the cost to employees of family member coverage), the employer will be permitted to use this qualifying offer simple reporting method for all employees, including those who did not receiving a qualifying offer for the entire year.

If you use this method, you must not report Part 2, line 15 for any month in which a qualifying offer is made, or for which the qualifying offer met the transition relief applies.

An employer that reports using this method must report 1A or 1I. You are not required to use this method even if you are eligible.

Box C: Section 4980H Transition Relief- You will want to check this box if you are eligible for 4980H transition relief. We discussed the Transitional Relief categories above and you can find more information about them here.

Eligibility for this transition relief is reported on Form 1094-C, line 22, box C, and the specific form of relief for which the employer is eligible must be reported on Form 1094-C, Lines 23-35, column (e), using either code A (50-99 Transition Relief) or code B (100 or more Transition Relief). An employer eligible for this relief is still subject to the Forms 1094-C and 1095-C reporting requirements for 2015 with respect to its full-time employees.

Please keep in mind if you are using a simplified reporting method, you will still need to keep detailed records to provide in case of an audit.

Box D: 98% Offer Method- To provide even greater reporting relief to reward employers offering to at least 98% of the company’s full time employees a bronze level or higher plan at an “affordable” rate, the IRS is offering the 98% Offer Method.

So how is the reporting different when using this method?

The employer is not required to identify which employees regularly work full-time hours. Rather, the employer is simply required to include in the report those employees who may be full-time.

Part III

Part three is where you will indicate if Minimum Essential Coverage was provided and for how long. If you offer MEC to at least 95% of FTE’s and their dependents for all 12 months you can check YES on line 23 for All 12 Months.

If you offered MEC to at least 95% for employees and their dependents you should enter for the applicable months. For the months you did not offer, enter X in the NO checkbox. If you did not offer MEC for 95% of FTE’s enter X in the NO checkbox. However, if you did not offer MEC and were eligible for Transition Relief, you can enter a yes for line 23 column A. See IRS instruction if this applies to you.

In column B, you enter the number of FTE’s for each calendar month. You must use the same day for each month of the year. You can use the first day, last day, or the first or last day of the payroll period of each month. You have to use one of these four. If the number is the same for every month, enter the same number in every box. If you checked YES in line 21, you will need to complete column B, if you are a member of an ALE for all 12 months, check ALL 12 months. If not, check an X for all months.

If you enter yes for one or more months, you will need to complete part four, but before we get to that, if you selected box C on line 22, you will need to add the code here.

Almost done with 1094-c. On the last page you will need to complete section four if you selected YES on line 21.

YOU’RE DONE! Go get a glass of wine. Now let’s look at a few of the frequently asked questions and deadlines you need to be aware of.


  • Q: Do I have to provide a 1095-C to all FTE’s I offered coverage to during the calendar year?
    • A: Yes, all FTE’s. Think W2. Any employees who were FT at any point during the year need to receive the form. This applies whether they were employed the whole year or not.
  • Q: Do companies have to offer coverage to spouses?
    • A: No, there is no requirement to offer coverage to spouses, but there is a requirement to offer coverage to dependents up to 26 years old.
  • Q: If I have less than 100 FTE’s do I need to complete the 1094-C for 2015?
    • A: Yes, all ALE’s with more than 50 FTE’s are required to report in early 2016 for 2015. Even though you are being given a pass on compliance, you still have to report and use the appropriate transition relief code.


January 31, 2016

Employee Must Receive 1095-C

Form 1095-C may be sent electronically like the W2 if the IRS electronic distribution requirements are met, but the employer must receive consent from the employee separate from the W2.

All of the 1095-C forms must be submitted with the 1094-C.

If you are filing over 250 1095-C forms, you are required to file electronically.

February 28th, 2016

Paper Form 1094-C are due

March 31st, 2016

Electronic submissions of Form 1094-C are due

Are you tired? I am tired. That was a long trip. While this might be the most boring post I have ever written (some would argue that), I hope you find it to be useful.

There are over 20,000 pages of legislation surrounding the Affordable Care Act and it is projected that there will be another 20,000 pages by 2020. We aim to boil this information down to the “need to know” information for you. Completing the 1094-C and 1095-C forms will be a challenge for all ALE’s, but hopefully these tools will help you to complete the forms and maintain compliance.

For those of you that are not familiar with ERG, we provide payroll and HR support services for small to mid-sized businesses around the country. We are headquartered in Columbia, SC and can serve all 50 states to help you maintain compliance with the ACA and all other HR related matters. We can automatically complete these forms for you if you use our payroll services or human resources information system.

This is not legal advice. This is a complex subject. If I missed anything above, please let me know and I will update accordingly. Thanks!