In 2013, business owners with 50 or more full-time employees are expected to be finalizing their plans in response to the employer mandate health care reform, which becomes effective in 2014. Among the choices for business owners will be complying with the employer mandate or planning to pay the penalties for opting out, or executing plans to avoid the employer mandate by trimming their workforce or selling all or a portion of their business before 2014.
Beginning January 1, 2014, the so-called “employer mandate” under the Patient Protection and Affordable Care Act (t he “PPACA”) requires employers with 50 or more full-time equivalent employees (“FTEs”), with “full-time” defined as working at least 30 hours per week, to offer “minimum essential” and “affordable” health insurance to those employees and their dependents. Employers who do not comply will be subject to potentially significant penalties. Employers are not required to provide health care coverage for part-time employees, however, part-time employees must be counted as partial employees when determining whether an employer has 50 FTEs. There will also be various other new requirements under the PPACA effecting employers beginning in 2014 that are beyond the scope of this piece.
Many business owners are considering what they can do to get their FTE count below 50 and avoid the employer mandate and the associated cost increases and regulatory burdens. Beware, however, that a reduction below this threshold effective January 1, 2014 may not avoid the employer mandate. The proposed regulations provide that a business could be subject to the employer mandate if during 2013 it averaged 50 or more FTEs. Employers would have the option to determine their 2013 headcounts by averaging the full 12 months of 2013 or any consecutive six-month period during 2013. These regulations are in the process of being promulgated and are not yet final.
Additionally, the rules regarding who is an “employer” are not straight forward and contain traps for the unwary, and can render some plans to dodge the employer mandate ineffective. Similarly, having a basic understanding of the rules should alert business owners to seek advice if two or more related businesses may be considered as a single “employer” under the employer mandate rules.