Recently employees of Long Beach, California, Circle K convenient stores, the nation’s largest theater chain – Regal Entertainment Group, AAA Parking, the state of Virginia, the city of Dearborn, Michigan, selected Wendy’s restaurants, Taco Bell have been notified that their full-time work hours will be reduced to part-time hours. Specifically 29 hours or less. Why is this happening?
Under a clause of President Obama’s health care law called the “Shared Responsibility Penalty“. Employers with 50 or more full-time employees – are now incentivized to reduce full-time worker hours to part-time hours. For many years, a full-time employee was considered an employee who works 40 hours or more per week. Now, because of a ‘new regulation’ written by HHS, a ‘full-time employee’ has been redefined as one who works 30 hours or more per week.
Under the PPACA, any employer with 50 or more full-time employees who does not offer PPACA approved MEC – “Minimal Essential Coverage” must pay an annual, non tax deductible penalty of $2,000 to the IRS for each full-time employee. Starting with the 30th full-time employee on up.
How the PPACA “Shared Responsibility Penalty” is triggered by employers
Beginning in 2015, full-time employees who are not offered MEC – ‘Minimal Essential Coverage’ through their employer and who are not eligible for Medicaid may be eligible for “Advanced Premium Tax Credits”. These ‘Advanced Premium Tax Credits’ will be provided by the taxpayer to artificially lower the extremely expensive coverage that will be provided in the new “Health Insurance Exchanges”.
The PPACA empowers the Internal Revenue Service to provide these ‘Advance Premium Tax Credits’ to childless adult individuals with incomes surpassing 138% and families making up to 400% of the FPL – Federal Poverty Level. Using 2012 FPL, this would mean that individuals making $42,680 annually and families making $92,200 would now qualify for an ‘Advance Premium Tax Credit’ in the new “Health Insurance Exchanges”.
On Wednesday, January 2, 2013 the IRS released proposed new regulations related to the PPACA “Employer Shared Responsibility” rules. There is important new information for employers to consider.
Beginning in 2015, an applicable ‘Large Employer” may be subject to a “Shared Responsibility Payment” under one of two different circumstances:
- 4980H(a) liability – Applies if an employer does not offer its full-time equivalent employees (and their dependents) MEC – minimum essential coverage, and any full-time employee is certified as having received an ‘Advance Premium Tax Credit’ when purchasing individual health insurance through a public Health Insurance Exchange. In this case, the employer may be liable for a penalty of $2000 per year times the total number of full-time employees (not counting the first 30).or
- 4980H(b) liability – Applies if the employer does offer its full-time employees (and their dependents) MEC – Minimum Essential Coverage – but the plan is ‘unaffordable’. ‘Unaffordable’ means that the employer requires their full-time employees to contribute more than 9.5% of their annual adjusted house hold income towards the cost of self-only MEC coverage, and at least one full-time employee is certified as having received an ‘Advance Premium Tax Credit’ subsidy when purchasing individual health insurance through a public Health Insurance Exchange. In this case, the employer may be liable for a penalty of $3000 per year times the number of full-time employees who are certified to receive, and purchase, subsidized individual health insurance using an ‘Advance Premium Tax Credit’ through a public Health Insurance Exchange.
In summary, employers with 50 or more full-time employees must either pay 90.5% of the cost to provide extremely expensive PPACA approved MEC – which includes the “Essential Health Benefits Package“, 65 Preventative Care tests and must conform to ‘Community Rating’ and ‘Guaranteed Issue” clauses. It is important to note that these clauses have already destroyed the individual health insurance market in all 8 states they were implemented in. Or, the employer must pay a $2,000 fine for each full-time employee (excluding the first 30 full-time employees).
Or, the employer can simply move full-time employees to part-time employees (less than 30 hours). In doing so they would then avoid both the massive cost to insure everyone and the $2,000 fine for not doing so. Tell me, which action do you think employers will take?