Strategies to Offset ACA Penalties

Strategies to Offset ACA Penalties

The obligations and penalties of the Patient Protection and Affordable Care Act will take effect in 2014. Under these provisions, if employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees, they may be subject to a penalty if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges.

Here is a look at two different staffing strategies that could help a business avoid penalties and contain healthcare costs.

Part-Time Worker Strategy
The Internal Revenue Code 4980H(a) penalty applies to full-time employees.  A contractor may choose to limit the hours of certain workers or create more part-time positions.  Part-time employees generally average fewer than 30 hours per week.

A successful part-time strategy may require the contractor to impose rigid restrictions on work schedules – which could limit the ability to respond to changing project conditions and project demands. However, if the contractor isn’t careful about monitoring employee’s hours, it might become subject to the Internal Revenue Service Section 4980H(a) penalty. 

If a contractor has 100 full-time employees, all with employer-provided coverage, and 20 part-time employees, none with employer provided coverage.

Because the contractors entire full-time workforce appears to have employer-provided coverage, the employer believes that it has satisfied the requirements and is not subject to the 4980H(a) penalty.
But assume that six of those part-time employees have worked enough hours to be qualify as full-time employees.  The employer could then be subject to the penalty, because it actually has 106 full-time employees, and only 100 of them have employer provided coverage.  The annual penalty under Section 4980H(a) would be $152,000.00 (106 full-time employees, minus the first 30, multiplied by $2,000.00).

Variable Staffing Strategy
The variable staffing strategy is similar to the use of independent contractors. Variable staff (i.e. temporary skilled workers) are generally not entitled to healthcare coverage, and their expanded use could offer businesses a way to avoid or reduce healthcare costs and PPACA penalties.

Under the Patient Protection and Affordable Care Act (PPACA), if a temporary skilled worker is actually an employee of a staffing company, and not an employee of their client, then the temporary skilled worker does NOT count toward determining whether the client is a “large” employer –and would NOT be considered a full-time employee of the client for purposes of the PPACA penalty.

The Affordable Care Act (ACA) will impact the bottom line of every construction company. Whether you agree or disagree with health care reform, business owners must determine the extent this new law will impact them and how best to prepare for it.  Please contact us or call 1.866.532.6777 to see if your business can benefit from a Variable Staffing approach. Our services can be structured to meet your specific organizational needs.

Construct Corps is a construction staffing company specializing in providing contractors with local skilled labor nationwide.
Construct Corps’ unique centralized recruiting/qualification systems allow contractors to utilize a local workforce in almost any
location at price that fits their budget. Go to for more information or call 866.532.6777.

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