by Bill and Mary Weaver
Adam Kantrovich, Farm Management Educator for MSU Extension, has heard “just about every notion known to mankind” on the topic of how to avoid having problems with the ACA. He has also studied the law carefully enough to be able to point out what sorts of things might get an employer in trouble.
For example, Kantrovich advises, don’t decide to divide your larger business into multiple smaller entities, solely for the purpose of getting around the ACA.
“If you develop a series of separate business entities, even with limited differences in ownership, they may still be considered a single ‘control group’ by the IRS. This would mean an owner is required to count all employees from all entities in determining their status as either a ‘Small’ or ‘Large’ employer under the ACA guidelines.
“This is a very tricky area,” Kantrovich explained. “You, your accountant and your attorney will have to look at controlling interests and percentages, but most likely, under the ACA, you will need to count all these entities as one control group.”
A second idea that is being frequently considered is downsizing. If the farm downsizes, the business can have fewer employees (but may produce less, and may have less revenue.) Because there would be fewer employees, the employer may be classified as a “small” employer. This would mean the employer would not have to provide any of the full-time employees with any health care coverage. There would also be no worries about “Employer Shared Responsibility” penalties.
Downsizing may work, Kantrovich acknowledged, if your business is entirely paid for, and you have no bank loans. But with bank loans, a business must generate a certain amount of cash flow to keep up the payments on the loans. If you downsize, will you have that needed cash flow?
A third idea sometimes floated is, “I think we’ll continue to insure only our managers [or our family members or our supervisors.]”
“The guidance of what constitutes the non-discrimination piece of the ACA has not yet been released,” explained Kantrovich, “but in the future, even if you are a small employer who is not required to provide health insurance, some believe the above could be an action that could result in a penalty.
“A discrimination penalty could also apply, even to small employers, if they are giving one health insurance benefit package to one group of employees and another package to another group. We won’t know until the official guidance has been released. But since these things could potentially bring problems and penalties, it would be wise to start working on solutions now.”
Fourth, don’t stick your head in the sand and HOPE you’ll be okay. There are potentially very serious penalties that apply. Be especially careful to follow the regulations to the letter. “There is an excise tax of $100 per worker per day that could be levied against your business if the insurance you offer doesn’t meet specific requirements, such as lifetime maximum limit limitations, providing preventative care, and coverage of pre-existing conditions, among other requirements.” Some believe this excise tax could also apply to small employers who are not required to offer health insurance, but who are providing some benefits.
Fifth, don’t ignore required paper work. By Oct. 1 of 2013, every employer under the Fair Labor Standards Act was required to provide employees with pertinent information including healthcare insurance coverage and employer-specific contact information.
The employer also has to provide all new employees with the same information within 14 days of hire. There are two forms, available in English and Spanish, that you can download from the Department of Labor or the Farm Information Resource (FIRM) Team website through the ACA Link and use as templates. Fill in your contact information. If your employees shop on the exchange, they may need to give their employer information.
It is recommended that you include this in your employee-hiring packet with a page that lists all of the information that the new hire is receiving. Ask them to sign the page acknowledging the documents that they have received, and keep a copy of this.
A sixth idea being floated by strictly family businesses is, “Well, I’ll just pay the penalty.” In the next few years, though, the penalties for the individual mandate are set to rise steeply, and the penalties for the ESR may also increase due to increases in healthcare coverage costs.
If you smoke, your premium could be up to 1.5 times what it would otherwise have been for a comparable non-smoker. Premiums for older individuals cannot be any more than a 3:1 ratio when compared to individuals of younger age with similar other variables.
To summarize ACA requirements for “large” employers, in January of 2015, employers with an annual monthly FTE count of 100 or more are required to offer healthcare coverage to their full-time employees.
Transition relief allows an employer to at least make the offer of health insurance to a minimum of 70 percent of your full time employees, instead of 95 percent as originally stipulated. In 2016 that goes to 95 percent.
You must also show that you’re making a start in offering insurance plans your employees can purchase for their dependent children. These plans are required to include coverage for vision and dental care for dependents up to age 19.
If you’re a “large” employer with an annual monthly average employee count of 50 to 99, and meet two other specific criteria, (check with your accountant), you could be eligible for transition relief so that you may not have to offer health insurance to your full-time employees until January 2016.
“Employers who don’t plan to offer health insurance must contend with the possibility,” said Kantrovich, “that they may lose employees, because, with the skills employees have, they may be able to walk down the road and find a job that does offer healthcare.”
“That is going to have to be a consideration in the long term,” he continued. “How do you compensate for that? You may be wise to look at this as a human resource issue. If you begin to look at it from that perspective, rather than as something to try to get out of, and make your fiscal, financial, and administrative decisions in that light, you may find that in the long term, your business may be better off.”
Some possible changes to the law would make things easier. The Farm Bureau is supporting a change in the definition of “full-time worker” to one who provides 40 or more hours of service a week. “This would help us out a lot.”
“In addition, if we can exempt all seasonal labor, and stick with the 6-month definition of a seasonal employee, the majority of our problems in agriculture will have gone away.
“For those of you who are politically active and have the ear of your local congressman and state senator, and those of you who are willing to join with them, these are some of the points we ought to be emphasizing.”
Avoiding the unexpected with the Affordable Care Act
by Bill and Mary Weaver