The Affordable Care Act 50 employee rule is cause for some discussion. In our last post we introduced Matt Lapointe, who is an attorney with Wetherington Hamilton, P.A. in Tampa, Florida. Matt is an expert on the Affordable Care Act (ACA) and it’s our privilege to host him as a guest blogger in our ObamaCare Q & A series. He will address vital questions to help prepare small businesses on ACA requirements. Matt’s first blog deals with an explanation of the 50 employee rule.
Q. I know that ObamaCare’s Employer Mandate requires employers with 50 or more employees to offer health coverage to their full-time employees starting on January 1, 2016. My wife and I each own 50% of two different LLCs – my interior design business and her plumbing company. The interior design business has 15 employees and the plumbing company has 38 employees. Because both companies are under 50, we don’t have to worry about the Employer Mandate, do we?
A. YES YOU DO. Under the ACA, companies that have common ownership or are otherwise closely related are aggregated for the purposes of determining whether or not they employ at least 50 full-time employees. This “aggregation rule” in the ACA piggybacks on two established tests codified in Section 414 of the Internal Revenue Code dealing with “controlled groups” and “affiliated service groups.” If two or more companies meet the “controlled group” test or the “affiliated service group” test and the combined total of employees meets the 50 employee threshold, then each separate company is subject to the Employer Mandate even if the separate companies do not individually have enough employees to meet the threshold. Because your two companies are commonly owned by you and your wife and because both companies combined employ a total of 53 employees, each company is subject to the Employer Mandate.
Thanks, Matt. This is valuable information and probably surprises many small business owners. As we mentioned in our last post, we aren’t ACA experts at Chronotek, and will not be able to answer ACA questions. We leave that to the legal advisors like Matt. However, we will soon be releasing 2 reports to help customers of our telephone timekeeping system. Our ALE Status (Applicable Large Employer) report calculates by month the total number of full-time and full-time equivalent employees as deemed by the ‘new’ numbers. This report can assist with determining the 50 employee ruling that Matt addressed today. Please remember that if you have more than one Chronotek account, you will need to combine the totals from both accounts.
In our next post Matt will address the very tricky issue of calculating the “real” number of full-time equivalent employees for ACA purposes. Don’t miss it. Subscribe to this blog or follow us on Facebook or Twitter.