Quick Q&As on Health Care Reform, at July 2012
Just yesterday, our colleagues Dana Thrasher and Bob Ellerbrock conducted a webinar that discussed the impact on company operations, now that the United States Supreme Court has weighed in on health care reform in its June 28 decision. That webinar prompted some pressing questions, some of the general ones are here (more complex fact patterns need more analysis than a Q&A can provide). We edited listeners' questions only for clarity. Yet, this is what people in the field want to know -- the practical details tied to daily operation of health plans, at this juncture:
Is the part-time employee aggregate penalty applicable if we offer health benefits to only full- time employees?
No. There is not a penalty tax applicable for a failure to offer coverage to part-time employees.
For purposes of determining whether an employer is an "applicable large employer" and subject to the mandate, an employer must count its full-time employees and a full-time equivalent for employees who work part-time. To do so, the employer must add up all the hours of service in a month for employees who are not full-time and divide that aggregate number by 120. The result of that calculation is then added to the number of full-time employees during that month. Then, if the average number of employees for the year is 50 or more, the employer is an applicable large employer. Although for purposes of determining whether an employer is an applicable large employer an employer must count a full-time equivalent for employees who work part-time, an employer is not required to pay a penalty tax for not offering coverage to part-time employees. The penalty charged is only for the full-time employees.
Is the 50 employee threshold assessed by EIN (employer identification number) or by commonly owned entities? If you have one owner of two S-Corps each with 30 FTE, are you a large employer?
The FTE count is across control group members. One owner of two S-Corps in your example would have 60 FTEs.
Do vacation hours count towards FTE calculations?
Yes. We believe that any paid working hours are counted towards FTE calculations.
The “penalty” only applies to large employers." Please define "large employer."
A large employer is one with 50 FTEs or more. An FTE is one who works 30 hours or more. Part-time employee hours are added to determine FTE count. Three part-time employees who work 10 hours each becomes one FTE.
If an employee refuses insurance offered by employer, and wants to purchase insurance through an exchange, will the employer be required to assist in the payment voucher through the exchange?
No. If the employee declines the employer’s plan, the employer has no payment obligation with respect to the exchange.