The Affordable Care Act, commonly referred to as “Obamacare,” looks like it is here to stay. Affected companies will have to offer health insurance required by the Act beginning in 2014. Have you started to plan how Obamacare could impact your Company? Now is the time to start.
Depending on the size of your workforce, your Company may be subject to a sizeable penalty if you do not offer “affordable health coverage” to your full-time employees.
If you qualify as a small employer, your Company could be eligible for certain tax credits if you do decide to offer your employees health care coverage.
The rules to determine the size of your workforce are complicated, especially if your company has a parent, subsidiary, or affiliate. Critically, companies that have a common owner or are otherwise related are generally combined together for purposes of determining whether or not they are covered by the Act.
The basic rules are as follows:
- If your Company has 50 or more full-time employees or “full-time equivalents” then your Company is a “Large Employer” covered by the Act.
- A “full-time employee” is an employee who works an average of at least 30 hours per week.
- To calculate the number of full-time equivalents, you add the number of hours worked by part-time employees per month and divide the total by 120.
- For example, 2 part-time workers who worked 15 hours each per week or 60 hours per month would be equal to 1 full-time equivalent
- If you are a “Large Employer” you could be subject to various non-deductible penalties if you fail to provide your full-time employees affordable health coverage. These penalties can reach $2000 per full-time employee per year.
- If your Company has fewer than 25 full-time equivalent employees, then your Company could be eligible for a Small Employer tax credit.
However, there are a number of potential options and solutions to avoid or limit exposure to the health care law including restructuring the ownership of your related business entities or creatively managing your staffing levels. Significantly, the new health care law defines a full time employee as one who works 30 hours per week. A company may be able to modify employees’ hours worked so that fewer of its employees work 30 hours a week. This can be accomplished through scheduling changes or shifting hours amongst employees.
Please give Brian LaFratta or your usual Huck Bouma PC contact a call to discuss how the Affordable Care Act may impact your business and how we can help you plan for these changes.
Brian LaFratta is the Chair of Huck Bouma’s Employment Law practice group. He can be contacted at (630) 344-1187 or at blafratta@huckbouma.com.
