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Affordable Care Act Thoughts (a bit wonky)

Today during Up With Chris, I became involved in a Twitter conversation about a specific point in the Affordable Care Act: Are “Large Employers” subject to penalties for NOT providing health insurance defined by the number of Full Time employees, or an hours based equivalent. Here’s what I found (Warning: mildly Wonky):

Updated below to include additional reference to Section 4980H of the IRS code.

Desclaimer: I am NOT a lawyer, nor a tax nor legislative expert. NOTHING in this post should be construed as advice, legal or otherwise. This is simply my inquiring mind exploring the issue from a layperson’s point of view!

Section 1513 “Shared responsibility for employers” seems to be the applicable section. Click here to see the full text. WARNING: I couldn’t find a place that makes it easily searchable, or linkable directly to any particular section.

Section 1513 defines a “large employer” as:

‘(A) IN GENERAL- The term ‘applicable large employer’ means, with respect to a calendar year, an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.

There are exceptions related to seasonal workers – who work 120 days or less.

Elsewhere, a “full-time employee” is defined as one who works 30 or more hours per week. The complexity of legislative language is such that I’m not sure if this definition applies to this section. However, as I can’t find another definition, it likely applies. Or (in a tribute to legislative obtuseness) it might be buried in a reference to the IRS code!  In another section, a “full time equivalent” is defined as 2,080 employee hours, but this is defining “Small Employers” in a context that seems to rule out any applicability to defining “Large Employers”.

So based on a fairly quick read (of a huge, obtusely worded document), I don’t think that part time employees are aggregated to full time equivalents for the purposes of section 1513.

In plainer language: Large employers CAN avoid penalties for not offering health care if they skirt the definition by having no more than 49 employees who work 30 or more hours/week.

One twitter friend is insisting that, beginning in 2014, the definition changes to a “Full Time Equivalent” definition, which would seem to negate what I just said. However, I can’t find any such reference, but acknowledge that it may be buried in a reference to the IRS code, some other US Code, or allowed by executive branch rule making. If it can be explicitly shown to me, I’ll amend this.

Thus, based on current information, I maintain that the ACA needs amending to redefine a “large employer” as one who has a certain number (between 1,500 and 2,000) of employee hours/week. This is needed specifically to close the loophole of restricting all (OK, most) employees to a 29 hour work week in order to avoid ACA penalties.

I have NOT thought about the “Seasonal Employee” exemptions (yet).

And I also wonder about branded franchise operations? Who is the employer? The word “franchise” doesn’t appear anywhere in the ACA. My initial reaction is, if the public identifies a large brand as a single entity – especially if based on franchiser advertising – then the brand should be the entity, not the individual stores. Franchise holders benefit from large brand ID. Should they not also have the responsibilities of large employers?

Update: My Twitter friend has provided this link to a May 23rd, 2011 request for comments on the proposed IRS rules regarding the definition of a “Large Employer” for section 1513 purposes.

I don’t know if this rule has been promulgated as is, amended, or not yet promulgated. However, it appears to this layman that, if it is promulgated as is, that:

  • Full Time Equivalents WILL count towards the 50 employee threshold and
  • This is contrary to the text of the ACA. Had Congress meant to leave it to the IRS, it would not have provided it’s own definition of “Full Time”.
  • This is essentially speculation. I am NOT a lawyer, nor am I versed in the ins and outs of the interactions between adopted law and the subsequent rules adopted by agencies.
  • I would be surprised if there has NOT been a shitload of behind the scenes lobbying on this. Primarily by lobbyists in the employ of big business who will vastly prefer the “simple” definition that doesn’t include any inclusion of “Full Time Equivalent” calculations.

Desclaimer (again): I am NOT a lawyer, nor a tax nor legislative expert. NOTHING in this post should be construed as advice, legal or otherwise. This is simply my inquiring mind exploring the issue from a layperson’s point of view!

 

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