The Patient Protection and Affordable Care Act of 2010 (“PPACA” or “Obama Care”) requires, beginning in 2014, that employers with 50 or more full-time employees (“large employers”) offer “affordable” health insurance to its employees. Failure to do so will subject the employer to penalties.
Future blog postings will address the coverage requirements and penalties under PPACA, but to start, what should you be doing in 2013 to determine if the mandate applies to your business?
Defining a “Large Employer”
Whether a business has achieved “large” status under PPACA is measured by calculating the sum of all full-time employees and all FTEs during the prior year (this is why an analysis in 2013 is critical). The number of FTEs is determined by calculating for each month of the prior calendar year (1) the aggregate number of hours worked (excluding any employee exceeding 120 hours) by non-full-time employees (those working less than 30 hours per week) in that month, (2) dividing by 120, (3) adding together the results of (2) for each month and (4) dividing by 12. Hours worked means hours when an employee is entitled to pay taking into account vacation, sick time etc. Special rules apply to businesses that have irregular vacation periods, such as educational employers, that make determining a monthly calculation more difficult.
More Points to Consider
The mandate applies to for-profit entities, government entities, and tax exempt entities. Affiliated entities under common control will be viewed as one entity in determining whether large employer status applies. Successor employers are considered the same as the predecessor. New employers will be viewed as to whether they reasonably expect to employ at least 50 employees or FTEs during a calendar year.
Note that the common law interpretation of “employer” and “employee” will apply, and an employer’s classification of independent contractor, consultant or otherwise as opposed to employee will likely receive very close scrutiny . Thus, care should be taken when deciding you are NOT a large employer and therefore exempt from the mandate based on your designation of workers as independent contractors as opposed to employees.
As is evident from the above, there are fairly complicated questions to be answered in determining “large” employer status. If in doubt, seek guidance from your legal expert on the PPACA mandates and/or Labor and Employment Law counsel.