The Internal Revenue Service (IRS) is trying to prevent employers from getting around the new “play or pay” health benefits rules by reclassifying full-time workers as something else.
The IRS talk about methods for classifying specific types of workers, such as teachers, airline pilots and rehired workers, in the preamble to draft regulations for implementing the “shared responsibility” parts of the Patient Protection and Affordable Care Act (PPACA).
The IRS also covers topics such as use of staffing agencies to avoid the PPACA benefits requirements and how to determine whether the benefits provided meet PPACA affordability standards.
IRS officials suggest in the preamble that employers and their advisers should avoid using complicated strategies to try to minimize the number of workers who are eligible for group health benefits under PPACA.
The IRS would take a dim view of an employer that failed to include travel hours in a sales rep's hours or preparation time in the hours of a college instructor, officials said in the shared responsibility draft regulations, which are set to appear in the Federal Register Wednesday.
IRS officials elaborate on the proposed regulations in a set of answers to frequently asked questions (FAQ).
When there are questions about how to count a worker's hours, the employer “must use a reasonable method for crediting hours of service,” officials said in the preamble. “A method of crediting hours would not be reasonable if it took into account only some of an employee's hours of service.” Officials said the IRS is working on a “general anti-abuse” rule to keep employers from using strategies such as employing a worker directly for 20 hours per week and employing the worker through a staffing agency for the rest of the week.
PPACA calls for employers with more than 50 full-time equivalent employees to provide a minimum level of health benefits for year-round employees who work more than 30 hours per week. Workers who do not offer the minimum level of coverage, or fail to ensure that the coverage meets affordability requirements, are supposed to pay penalties. PPACA added a section to the Internal Revenue Code (IRC), IRC Section 4980H, that governs how the IRS is supposed to go about applying the shared responsibility penalty provisions.
Comments on the proposed regulations are due March 18.
The IRS is planning to hold a public hearing on the draft April 23.
The IRS wrote the proposed regulations after asking members of the public to react to notices describing the general approach the agency might take in the regulations.
In response to questions about how the IRS would interpret the “30 hours per week” rule, officials said the agency would view a worker who worked 130 hours in a month as being comparable to a worker who worked 30 hours per week.
One controversy has centered on the term “affordability.” The IRS has proposed that employers be allowed to treat coverage as affordable if a worker's share of the cost of worker-only coverage were less than or equal to 9.5 percent of the worker's W-2 wages. Workers and group representing workers argued that the IRS suggestion could cause problems for workers with families, who might be able to afford coverage for themselves but not for spouses and children.
Employer groups said employers would have no practical way to know anything about a worker's overall household income.
In the proposed regulations, the IRS said it wants to let an employer stick with W-2 wages and the worker's share of the cost of self-only coverage when complying with the shared responsibility requirements.
Workers will be able to use their overall family size and total household income when they are trying to qualify for public health programs and government help with paying for private coverage, officials said
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
