I have just returned from the National Association of Health Underwriters annual conference in Atlanta. As you can imagine, there was a lot of discussion and education on the topic of Health Care Reform, and many of the exhibitors were focused on the same topic. I thought I would report to my clients on the more interesting tidbits of the 4 day trip.
Best lines from the presentations:
“This is chess, not checkers”
“An exchange is someplace you go to find out your choices, learn about the plans, compare costs, get advice and sign up for coverage. We used to call those people “brokers.””
“The south has two seasons – Hot and Humid” (remember we were in Hotlanta)
“To those people who still think the law is going away – the toothpaste is out of the tube, and it is smeared all over the counter”
“The south has four seasons – shrimp, crab, crawfish and oysters”
PAY OR PLAY PENALTY FINE TAX:
As you can imagine, this was the area of largest concern. Remember this applies to businesses with over 50 Full Time Equivalent Employees. Some interesting items:
– If you do not offer insurance, but no one qualifies for a subsidy, the $2000 tax cannot be triggered. The tax is not triggered by part time employees, or dependents.
– The law requires employee, and employee with child coverage, but not spouse or family coverage
– When the employee gets a subsidy, the IRS will send the money to the insurance carrier, who in turn will lower your bill
– The Affordability rule – the employee pays no more than 9.5% of their W2 income – is based on the lowest offered plan that meets the “Minimum Essential Benefit” rules – essentially the “Bronze” level plan. If you offer other, richer plans, they are not involved in the computation
Here is a BIG concern:
Remember that the term “affordable” is now a legislated definition of 9.5% of income. However, employees probably don’t think your plan is “affordable” unless it is free. If an employee checks the box on the exchange application that says “my employer coverage is not affordable” they will automatically get the subsidy, even if you are meeting the 9.5% rule and they don’t qualify for the subsidy! The big questions are, therefore, how long will it take (a) for you to get notified, (b) respond to the error, (c) get it reversed (the subsidy triggered a tax bill to your company!) (d) how long will it take to get the money back from the insurance company, and (e) will this trigger a special enrollment period – can you get your employee back on your plan off-cycle?
FULL TIME EMPLOYEE calculation
In the calculation to determine if you are over 50 “Full Time Equivalent” (FTE) employees, and hence subject to the Play or Pay tax, Part Timers are counted. You add up the total hours (lets say 10 PT employees, X 25 hours/week = 250 hours per week X 4 = 1000 hours per month). Now divide that by 120 (1000/120 = 8.33) and that is your number of FTE’s that get added to your full time employees. You drop the decimal, so you have 8 FTE’s. If you had 43 Full Time employees, for the law you now have 51 (43+8) employees, and are subject to the Play or Pay rules.
If you are a new business and not in existence for more than a year, this determination will be based on what you expect your employee count to be.
Yes, I know there are 4.33 weeks in a month, and that would make more sense. Apparently the government is not aware of that.
A very popular method to work around the Play or Pay rules is moving your employees to a PEO – Professional Employer Organization. This moves them off your payroll and insurance and onto the PEO’s books, and moves all the Human Resource functions as well. A PEO typically charges between 3-15% of gross payroll. (Yes, I have these available.)
The concern here currently is the definition being used by ObamaCare – which says they don’t counted as your employees only if they get their management and direction from the PEO or temp agency. There is work in Congress to get this changed. Note that the Supreme Court decided that the PEO is the employer of record in a previous case, but that new law trumps past decisions.
Do you own any interest in another business? Under the affiliated control group rules, this may bring them into your employee counts. The Attorney used this example: you own a pizza parlor, and you helped out your son with his pizza parlor, and your daughter with her burger joint. You own some of all three restaurants. Each restaurant has 25 employees. Under the Control Group rules, this makes all three restaurants subject to the Play or Pay rules.
How would that work? Well if you are not offering insurance at any of the restaurants, the three businesses would owe a total of $90,000 to the government. How did I get that? You have 75 employees total, and the first 30 do not count; so 45 employees X $2000 = $90,000. Each Restaurant would owe their prorated share.