I have a lot of clients who are concerned about “Obamacare” or the Patient Protection and Affordable Health Care Act (PPACA). Right now, the PPACA really only has the basic framework in place. There are still a number of regulations that must be finalized before implementing the Act.
Under PPACA, individuals will be required to have healthcare coverage as of January 1, 2014 (the “individual mandate”). Businesses with 50 or more full-time employees (“large employers”) must offer healthcare coverage to 95 percent of their full-time employees. If a large employer does not provide coverage, the employer faces a penalty under Internal Revenue Code Section 4980H(a). An employer that doesn’t cover at least 95 percent of employees would be hit with a penalty if any of its full-time employees without employer-provided coverage purchases coverage from an exchange and receives premium assistance.
My clients are most concerned with the penalties. IRS Section 4980H(a) calls for severe penalties against large employers who do not cover 95% of their workforce: $2,000.00, multiplied by every full-time employee, minus the first 30 full-time employees. In a 50 person company, that’s $40,000.00 in penalties.
In an attempt to avoid the requirements and penalties, many employers are considering using “contingent” workers. Contingent workers are independent contractors, leased employees, and part-time employees. These contingent workers are usually not entitled to employer-paid healthcare coverage, which helps to cut costs. However, before employing independent contractors, leased employees, or part-time employees, I encourage employers to obtain legal counsel to ensure these workers truly qualify as contingent workers. As an example, to qualify as an independent contractor, there is an entire legal checklist that must be met. Further, independent contractors must have independent contractor agreements.
I strongly recommend seeking the assistance of an attorney if you are considering hiring or retaining contingent workers.