Given the complexity and continued scrutiny of the Patient Protection and Affordable Care Act of 2010 (PPACA), the Obama administration gave employers a reprieve: It postponed implementation of the “play-or-pay” requirements until Jan. 1, 2015.
But agents and brokers need to warn owners of family-owned businesses about the requirements today.
The Centers for Medicare & Medicaid Services (CMS) has estimated that the Internal Revenue Service (IRS) could collect more than $87 billion in Section 4980H play-or-pay taxes from 2014 to 2019.
Business owners may not have to pay the play-or-pay penalties today, but, when they are determining whether they are subject to the provision – Section 4980H to the Internal Revenue Code (IRC) – they will use employee data collected this year.
IRC Section 4980H will require “large” employers that choose not to provide health benefits to pay penalties.
If you are involved in any way with group benefits, you probably know that the mandate applies to companies that employ 50 or more full-time employees or “full-time equivalent” (FTE) employees.
If you are not deeply involved with the group health market, you may not be aware of just how complicated counting the employees can be.
To qualify as full-time, an employee must work 30 hours per week, or 130 hours per month.
A company will determine how many FTE employees it has by adding up the hours worked by all part-time employees. If, for example, an employer has 20 part-time employees, each of whom works 15 hours per week (half the hours of a full-time employee), the hours will be combined, giving the employer the equivalent of 10 more full-time employees.
The IRS is using the common control provisions of IRC Section 414 to define the term “employee.” Under those provisions, a worker is an employee if the employer has the right to direct the ends to be achieved by the employee and the means whereby the employee achieves those ends.
Employers do not have to count leased employees, sole proprietors, or partners or shareholders with ownership interests exceeding 2 percent.
An employer that meets the threshold of having 50 or more employees, or 50 or more FTEs, will have to decide whether to play (offer coverage) or pay “shared responsibility” penalties.