The Affordable Care Act and Your Business

Monday, Apr 8th, 2013

Employer Fundamentals: #1

Information being disseminated about the Affordable Care Act has become voluminous and confusing. In an attempt to keep our clients focused on how the law may impact their business, we are providing a series on “The Affordable Care Act and Your Business - Employer Fundamentals.” This article is the first in that series.

Does the law apply to your business?

A. Do you have 50 or more full time employees?

The Affordable Care Act applies to businesses with 50 or more full-time employees and/or full-time equivalents (FTEs). For purposes of the Affordable Care Act, a full-time employee is one who works 120 hours per month (or 30 hours per week) or more. When determining whether a business has 50 full-time employees, each 120 hours per month of part-time labor equals one full time employee. This is called a “full-time equivalent” or FTE. (NOTE: Part-time employees [employees working less than 30 hours per week] aren’t entitled to insurance. They are only included for purposes of determining if an employer has 50 full time and/or equivalent full-time employees).

Example:

An employer has 48 employees who work more than 30 hours per week and has part-time employees who work a total of 240 hours during the month. The total number of full-time employees and/or full time equivalents is calculated as follows:

48 full time employees (employees who work more than 30 hours per week)

2 full-time equivalent employees (240 part-time hours divided by 120)

TOTAL: 50 full-time employees and/or full-time equivalent employees.

B. Do you Have Multiple Businesses?

Another issue to consider in determining whether you have 50 full-time employees deals with the ownership of multiple companies. The Affordable Care Act will utilize what is known as “controlled group” provisions. These provisions emphasize who owns the companies - not what the companies do. This mean that business owners who own two or more completely different businesses with less than 50 full-time employees could have their employee numbers combined - qualifying them under the law and forcing the owner to provide insurance for full-time employees in both companies. The IRS generally assumes spouses own interest in each other’s companies, so one can also expect to have those two entities combined for purposes of the law.

C. Conclusion

If you have fewer than 50 full-time and/or full-time equivalent employees, the law mandates do not apply to you. However, if you are an employer with 25 or fewer full-time employees, you may be entitled to tax credits for providing health insurance.

If you have 50 full-time and/or full-time equivalent employees or more, the Affordable Care Act applies to your business. In this case, you must make the determination if you are: 1) going to provide “Minimum / Affordable” health insurance and avoid potential penalties; or 2) not provide insurance and, instead, pay the penalties associated with not providing “Minimum / Affordable” coverage.

In the next article, we will explore what constitutes “Minimum / Affordable” coverage.

This document has been prepared by Chris Lencewicz Esq.,.

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