Rhetoric Over ACA, Anti-Abuse Rule Heating Up

With the implementation of the Affordable Care Act employer mandate inching ever closer, chances are good that one of the hottest arguments between employers and the federal government will be around how full-time employees are counted in their rolls … and how employers plan to respond to how they’re counted … and what the administration plans to do with employers that try to cheat that system.

160137293--gavel and timeThe ACA stipulates that, beginning in 2014, employers with 50 or more full-time employees (including full-time equivalents) must offer all employees working an average of 30 hours per week or more in a month healthcare coverage with “minimum value” or pay penalties. (In other words, although large employers are not required to provide healthcare coverage to part-time employees working less than 30 hours per week, these part-time employees are included in calculating the threshold number of 50 workers that would require employers to offer affordable coverage to all full-time employees.)

Since our recent postings about the Internal Revenue Service’s proposed “Shared Responsibility for Employers Regarding Health Coverage” regulations and penalties (this one by Web Editor Michael J. O’Brien and this one by me — the latter, including details about how FTEs will be calculated and links to both the regulations and a list of questions and answers from the IRS) — I came across this piece on the Society for Human Resource Management website (subscription required).

At the very least, the SHRM piece underscores just how impassioned and volatile this headcounting has become. And I can only surmise it will get louder and feistier as 2014 nears. As SHRM quotes from a speech by Rep. Tom Reed, D-N.Y., on the House floor:

 In the last month and a half, I went to a business just north of Cornell, N.Y, a small electronics company that’s been struggling day after day, just trying to make ends meet. It has about 48 employees. [The owner] stated to me that because of this law, the Affordable Care Act, and its 50-employee threshold for the additional bureaucracy and requirements and taxes and penalties that Washington, D.C., is putting on that business if he goes over that 50-employee threshold … he will keep his employee rolls at 48 and not venture down the path of hiring two more individuals.”

Or this, from Kelly Holland O’Leary of the Kalamazoo Valey Community College Federation of Teachers in Kalamazoo, Mich.:

As the president of a newly formed union of a part-time community college faculty, I am deeply concerned that the government’s attempt to provide health coverage to full-time workers of 30 hours per week will result in colleges and universities, nationwide, increasing the number of part-time faculty so as to decrease our hours to avoid paying health coverage for the majority of their teaching staffs.”

As Adam Solander, an attorney at Washington-based Epstein Becker Green, reported during a Jan. 9 hosted by his firm, employers are getting calls frequently from employees who read about the [employer mandate] and are worried about their hours being cut below the 30-hour threshold. Some are even asking their employers to keep their hours the same, promising that if the employers offer them health insurance, they’ll decline it, the SHRM story notes.

Yet the law as it stands would still allow those employees to turn around and get federal health subsidies, which could also result in employer penalties, even though the employer offered health insurance, it states.

And as if all this isn’t enough to raise the eyebrows of every employer, large and small, the IRS’s inclusion in its regulations of what it calls an “anti-abuse rule” is intended to stop you in your tracks in case you’re contemplating ways around them.

As the IRS states in its regulations, “the Treasury Department and the IRS are aware of various structures being considered under which employers might use temporary staffing agencies (or other staffing agencies) purporting to be the common-law employer to evade application of [the FTE calcuation and, therefore, the law].”

Here — so you have no doubts about how serious the IRS is about going after rule-benders — is what it states in its “shared responsibility” regulation:

In one structure, the employer (referred to in this section as the ‘client’) would purport to employ its employees for only part of a week, such as 20 hours, and then to hire those same individuals through a temporary staffing agency (or other staffing agency) for the remaining hours of the week, thereby resulting in neither the ‘client’ employer nor the temporary staffing agency or other staffing agency appearing to employ the individual as a full-time employee.”

It is anticipated that the final regulations will contain an anti-abuse rule to address the situations described … . Under that anticipated rule, if an individual performs services as an employee of an employer, and also performs the same or similar services for that employer in the individual’s purported employment at a temporary staffing agency or other staffing agency of which the employer is a client, then all the hours of service are attributed to the employer for purposes of applying [the FTE calculation and the employer mandate].”

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