On the road a lot recently, speaking to large and small rooms of employers, we have seen what we expected to see about now. As much as their questions, it’s been the look in the eyes of the audience, their body language, indicating that Affordable Care Act compliance worries are back on the front burner. Maybe busy executives were wise to focus elsewhere since July 2013; certainly, the rules then are not the rules now. But too many employers know too very little about their ACA obligations, and they have precious little time left to learn. So, we’re going back to basics for a few weeks, before we resume our hunt for dangers lurking in the weeds. To our many sophisticated readers, we apologize for the do-over. If something new and urgent arises, we’ll interrupt this series to cover it.
Here are several high-altitude, headline concepts that deserve prompt attention.
You’re Being Measured Now
Your status, or not, as an “Applicable Large Employer” under 26 U.S.C. § 4980H, subject to taxation for failing to offer affordable, qualifying coverage to substantially all your full-time employees and their dependents, is being measured in 2014. If your plan has been to get small by January 2015, so as to avoid coverage, you need a new plan. Prior, related articles are here, here and here.
The Common Law Employer Pays
Employee leasing can be an effective management tool, and the IRS wrote its employer mandate final rules to help preserve that option. But do not expect the government to excuse you from ACA obligations to leased employees except as precisely promised in the written rules. Otherwise, the IRS is likely to look to the “common law employer” of the leased employees. Related, prior articles are here, here, and here.
Similarly, your common law employee is likely to be your ACA responsibility, even if you call him or her an independent contractor, even if you have a written contract that calls him or her an independent contractor, even if he or she is pleased with the relationship. The ACA gives the IRS new, effective tools for discovering such misclassifications.
Some Assembly Required
You probably can’t avoid being an Applicable Large Employer by cutting-up your business into nominally separate legal entities, each of which has fewer than 50 full-time employees (including the full-time equivalent hours of part-time employees). That’s because the ACA uses the broad IRS “controlled group” test. Relatively few professionals are qualified to analyze controlled group status. Too many are giving that advice.
“Hours of Service,” Not “Hours Worked”
Full-time employee tracking depends on which measurement method you are using, but all lawful methods require all employers to count hours in addition to FLSA “hours worked.” If you are looking only at hours worked, you may undercount your “full-time” employee workforce.
Known Unknowns Are Few
Some advisors still are telling employers that reliable advice cannot be given because so few rules actually have been written. That advice was excusable as recently as early 2013; not any more. We’re awaiting major rules on plan discrimination in favor of highly-compensated employees and on automatic enrollment by certain large employers. We need to see the actual process for Exchange notices to employers of subsidy certifications of people claiming to be their employees, and we need to see the employer appeal process. We’re hoping for better sub-regulatory guidance on a number of subjects, especially fears about inadvertent MEWA’s due to employee leasing. We will not be surprised if some existing “transitional relief” is amended or extended. Nevertheless, if you can’t get most specific questions answered specifically (not the same as “simply”), you need a different advisor. Our ACA Advisor Pop Quiz is here.
Note: When you read a prior article, please keep in mind that it was written based on the rules published at the time, to offer a simple, educational introduction to an important subject. Do not substitute anything you read on this site for the current, competent, fact-specific ACA advice that you need.