As a business owner, making sure you are in compliance with all of the mandates of Obamacare is challenging, to say the least. The requirements are not always clear. Take the basic mandate that all employers with more than 50 full time employees must provide affordable insurance coverage that meets the minimum standards set by the ACA (Affordable Care Act). If you have more than 50 full time employees (those working more than 30 hours a week) you have to comply or face a tax of $2000.00 per full-time employee over 30 employees. If you have less than 50 full time employees then you are not required to provide coverage. Sounds pretty simple and straight forward doesn’t it? Unfortunately, we are talking about the government here, so nothing is ever simple or straight forward.
Many businesses, in an effort to avoid the high costs of the coverage mandate, have begun reclassifying employees from full-time to part-time and reducing their hours to below the 30 hours per week. While this may seem like the best solution, be aware, it’s not as simple as it seems.
The following is the example provided in the Congressional Research Service report:
“The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis. This is done by taking their total number of monthly hours worked divided by 120.
For example, a firm has 35 full-time employees (30+ hours). In addition, the firm has 20 part-time employees who all work 24 hours per week (96 hours per month). These part-time employees’ hours would be treated as equivalent to 16 full-time employees, based on the
20 employees x 96 hours / 120 = 1920 / 120 = 16
Thus, in this example, the firm would be considered a “large employer,” based on a total full-time equivalent count of 51—that is, 35 full-time employees plus 16 full-time equivalents based on part-time hours. ”
Even though this firm only has 35 full-time employees, it’s part time employees count towards the full-time equivalent, making this company one that must either comply with the mandates of the ACA or face tax penalties. The good news for employers is implementation has been moved to January 1, 2015 for businesses. This allows business owners time to plan. The best place to start is to seek the advice of an accountant that is familiar with ACA laws and regulations.