If you offer contract staffing, you are undoubtedly concerned about the upcoming employer mandate of the Affordable Care Act (ACA or Obamacare) and how it may affect your firm. Depending how many full-time employees you have (counting both in-house and contractors), you may be subject to the employer mandate. So let’s take a look at some of the most common staffing firm Obamacare questions:
- Will my firm have to provide healthcare insurance under the ACA’s “employer mandate”? If so, when? All employers, including staffing firms, with at least 50 full-time or “full-time equivalent” W-2 employees will be required to provide full-time employees with healthcare coverage that provides “minimum value” and is “affordable,” as defined by the ACA. To determine your full-time equivalent number, divide the hours of non-full-time employees in a month, including overtime, paid time off, and holidays, by 120. The number calculated must be added to the number of actual full-time employees to determine if a company falls above or below the 50-employee threshold. If you have 100 or more full-time or full-time equivalent employees, you must start complying in 2015, with a few temporary modifications to the original provisions. Those with 50-99 full-time employees get a reprieve until 2016.
- How can I avoid having to provide coverage? There are basically two ways. First, you could make sure that you don’t take on enough contractors to put you over the 50-employee threshold. The problem is, that means possibly turning away business, which no company wants to do. The second way is to outsource the employment of your contractors to a contract staffing back-office. Because the back-office assumes the employer responsibilities, they are responsible for ACA compliance, not you. Therefore, you can take on as much contract staffing business as you want without worrying about the costs and headaches that come with the ACA.
- Can I create divisions or separate firms to stay under the 50-employee threshold? No. Companies and divisions under common ownership count as one company. Therefore, all the employees in companies or divisions under your ownership will be counted when determining where you fall in regards to the 50-employee threshold.
- Who is the employer for the purpose of offering coverage: the staffing firm/back-office or the client company? Common law determines who the employer is. If you pay the contractor as a W-2 employee and assume the employer duties, your firm should be considered the employer and would retain responsibility for providing coverage.
- Who is the employer for purpose of offering coverage if a recruiter/staffing firm OUTSOURCES the back-office? Again, common law would likely find that the company with the individuals on its payroll is the employer. Therefore, if you outsource the payroll and other employment duties to a contract staffing back-office, they would be the employer and would be responsible for ACA compliance, including providing health insurance coverage.
- Can we end assignments or deny reassignment to avoid providing a contractor coverage? This is a dangerous proposition that could easily backfire on you. Section 510 of ERISA makes it illegal for employers to make employment decisions specifically to keep an employee from obtaining or keeping benefits. You could risk ERISA fines and even a class-action lawsuit if you employ this technique.
This general summary of law should not be used to solve individual problems since changes in fact situation may require a material variance as to the applicable law. This article is for information purposes only and should not be construed as legal advice.
