Employers should now be tracking on a monthly basis their number of employees and the number of hours their employees work in order to accurately determine if they are required to offer health care coverage in 2014, and to know which employees will be eligible to receive the coverage.
Arnall Golden Gregory attorneys Warren E. Kingsley and Douglas A. Smith stressed that point in their discussion of the Affordable Care Act’s “employer mandate” on March 20 before 220 members of the Gwinnett Chamber of Commerce.
Employers with at least 50 full-time employees (including full-time equivalents) must offer a health care plan next year. A full-time employee for this purpose is one who averages 30 hours of work per week (or 130 hours per month).
Employers that are required to offer health care coverage but do not will be subject to a monthly penalty of $166.67 ($2,000 annually) for each full-time employee greater than 30. For an employer of 100 full-time employees, the annual penalty would be $140,000 (100 minus 30 times $2,000).
Mr. Kingsley, leader of Arnall Golden Gregory’s Employee Benefits and Executive Compensation Practice, and Mr. Smith, of counsel in the Employee Benefits and Executive Compensation Practice, presented a detailed PowerPoint presentation explaining key issues of the ACA that employers and health care providers should consider now. That presentation can be viewed on the Gwinnett Chamber website: http://www.gwinnettchamber.org/healthcarelaw/.
Employers that offer health care coverage that is not “affordable” or that does not provide “minimum value” will be subject to a different potential penalty: $250 per month, up to $3,000 a year, with respect to applicable full-time employees. Both penalties will be triggered when employees apply for coverage from the state health care exchange and receive a premium tax credit or cost-sharing subsidy, and both penalties are non-deductible for tax purposes.
Enrollment for exchange health care coverage starts in October of this year and the new employer health care coverage mandate requirements begin January 2014. Employers should be aware that a big swath of full-time employees — taxpayers whose household income is 100 percent to 400 percent of the federal poverty level — will be eligible for a premium tax credit for exchange coverage, if they are not offered affordable employer coverage with minimum value. That presents a high risk for employers that do not comply with the ACA employer health care mandate.
The Arnall Golden Gregory PowerPoint presentation also looks at numerous other issues, including employees with variable work hours, seasonal workers, look-back measurement rules for determining “full-time” employees, employer “controlled groups,” and alternative compliance strategies (e.g., decisions about the employee premium rate scale, premiums for coverage of dependents, and other options).
One alternative strategy is to not offer coverage and pay the $2,000 per full-time employee (less 30) penalty, but is that practical and will that put the employer at a competitive disadvantage?
Mr. Kingsley cautioned against employers trying to mischaracterize their workforce to avoid offering coverage (e.g., improper use of “independent contractor” status). “It’s a very bad idea to be playing games with misclassification of workers,” he said.
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