HEALTH CARE REFORM PENALTIES:

What are the consequences under Affordable Care Act if an employer offers no health coverage? 

The Affordable Care Act, and the state health exchanges it mandates, are fraught with confusion – particularly for employers. Business owners just want to know what decisions they will be faced with, and how much time will they have to figure it out before the next fiscal year. The health care reform law does not specifically require employers to offer health coverage to their employees. However, beginning in 2014, an employer will be liable for a penalty if at least one of its full-time employees obtains subsidized coverage through an Exchange.  The  use of a skilled trade staffing company to provide your project specific skilled labor needs will mitigate this penalty. The sweeping and unprecedented legislation is taking effect so quickly that not all the answers are clear. Most employers are waiting for decisions at a federal level before they can take action or answer pressing questions.  The meaningful interpretation of the Affordable Care Act will be an ongoing project for Construct Corps in 2013 and beyond.    Proposed regulations that attempt to resolve issues and practical problems related to employer penalties under the “play or pay” provisions of the Affordable Care Act were revealed early January by the U.S. Department of the Treasury and the Internal Revenue Service and placed in line for publication on Jan. 2. The proposed regulations run 144 pages long. Under the Affordable Care Act, beginning in 2014, most employers will be subject to penalties if they decide not to offer health care coverage to employees and dependents.  To be covered under the penalty provisions, an employer must have averaged at least 50 full-time equivalents during the preceding calendar year.   To determine the number of full-time equivalents, add up the number of hours that part-time workers performed during the month and divide that number by 120.  Add the resulting number to the number of employees who work more than 30 hours a week.  This gives you the number full-time equivalents for the employers.

To calculate a month’s penalty, use the following formula.

(number of full-time employees during the month – 30) x $166.67 = Penalty for that month

Here is an example:
XYZ Electrical Contractors, Inc. has 85 employees in the month of June 2014, and the company does not provide health insurance to those workers. That month, three XYZ Electrical Contractors, Inc.’s employees are participating in the state’s health insurance exchange.

(85 – 30) x $166.67 = $9,166.85

XYZ Electrical Contractors, Inc. would pay $9,166.85 penalty for June.

The best news for contractors with project specific staffing needs is the much-anticipated ‘look-back’.  The ‘look-back’ system allows temporary staffing agencies to measure the full-time status of employees over retrospective averaging periods as long as 12 months — instead of making that determination over monthly averaging periods.  If XYZ Electrical Contractors, Inc. used temporary staffing as their primary source for project specific labor they would capture an annual savings of nearly $110,002.20 ($9,166.85 x 12 months) in potential penalties.

Content  sourced from the Society for Human Resource Management