What you don't know about new health care insurance laws could cost you
by Adam Bonsky
October 20, 2014

It’s time for employers to begin the process of implementing the provisions of the Affordable Care Act (ACA) which apply to them. Large employers that average 100 or more full-time equivalent employees during 2014 (50 or more during 2015) are required to begin offering health insurance to their workers Jan. 1, 2015—and there’s a lot of ground to cover before then. While smaller employers are not legally required to provide health insurance under ACA, every individual in the U.S. is now required to have health insurance. Those unfamiliar with health insurance, the terminology used and the process of comparing plans can become overwhelmed. Here’s a checklist of items you need to be aware of as the January deadline draws closer.

1. Track employee work hours

When determining your number of Full-Time Equivalent Employees (FTEs), the ACA legislation will look back at the previous year, and you should, too. This can be challenging for construction-related businesses who encounter volatility in hours worked as a result of weather and other factors. Employees who work less than 30 hours per week are taken into account to determine whether your company is subject to the ACA tax penalties beginning in 2015.

Full-time employees are added to part-time employees to determine if your company meets the threshold of 100 FTEs, and is subject to the ACA penalties in 2015. The hours of all employees who did not work an average of 30 hours per week during a month are added together each month, and divided by 120 hours to determine the equivalent number of full-time employees for the part-time workforce.

2. Determine who you must cover

You may consider a worker who averages 30 hours per week to be part-time. The ACA does not. Full-time employees must be covered to avoid the ACA business penalties, and employees who average only 30 hours per week are considered full-time employees for purposes of the ACA. For new employees, at the time of hire, you must determine whether they are “reasonably” expected to have 30 hours of service per week (if they are not seasonal employees). If so, they are considered full-time employees and must be covered if you are a large employer.

3. Factor in control groups Have you considered breaking your

company into two subsidiaries to avoid ACA compliance? Save yourself the time and trouble. Two companies that are part of a “controlled group” that employs enough full-time equivalent employees combined to be considered a large employer are both considered large employers under the law.

4. Reducing workers’ hours may actually cost more

Some employers may be tempted to manage hours so that all employees are part-time. While this may make you exempt from ACA compliance, subject to anti-abuse regulations, the consequences for your business can be even more significant. You may lose your best employees because they will likely look for an employer or a union who will cover them. Health insurance is complex, and the process for obtaining it as an individual can be confusing and frustrating. Employees who are in high demand will likely look for an employer that will relieve them of this burden. Particularly for contractors who do Davis-Bacon work, the benefits of providing health insurance coverage for your workers far outweigh any savings you think you may realize by attempting to get around complying with the law.

5. For government contractors, funds to pay for health insurance are included in the wage determination

Using the fringe benefit portion of the prevailing wage to provide health insurance for your workers will actually save you money. When used to pay for benefits, including health insurance, these dollars are removed from payroll and therefore are not subject to payroll taxes and assessments such as FICA, FUTA, SUTA, and in most states, workers compensation insurance. Over the life of a contract, that adds up to significant savings.

6. Pay or Play

There are a lot of factors to consider when calculating your options, including fringe rates per job, the company’s tax rate, deductibility of employer contributions, expected mix of work in the future, etc. Why not pay to provide health insurance for your workers, especially if you work on government contracts? If you choose not to offer health insurance for your full-time workers, and even one of your employees receives a subsidy or tax credit for obtaining insurance on their own, you’ll pay the government a $2,000 tax per employee (based 2015 and 2016 regulations).

And, if workers purchase insurance on their own, they pay for it with post-tax dollars. Employer-paid insurance is the only way for employees to use pretax dollars to pay their insurance premiums, so why not use fringe dollars for this purpose? It results in savings for your workers and for your business. Keep in mind that the fringe is an employer contribution, so it is up to the business owner to decide on how to meet the fringe obligation.

7. Hour banking can make tracking hours simpler

Hour banking breaks down the monthly premium into an hourly rate, which makes tracking, accounting, reporting (and bidding) much easier. Hour banking can be done for companies working on projects in several states, across multiple jobsites and employees who perform work in different job classifications. It enables workers to bank extra hours and premium accumulated during peak work times, then draw from that bank to extend coverage for themselves and their families when work is slow. What happens when bad weather causes project delays? Or perhaps you have a lag between contracts that result in short-term layoffs. This is especially important with ACA’s requirement for all individuals to have health insurance. How will your employees pay their insurance premiums during work stoppages or slowdowns? If they do any work for you that month and are otherwise a full-time employee requiring coverage during a month, your company will be on the hook for the ACA penalties in some situations.

The costs of failing to comply with ACA extend far beyond the penalties. While