As Obamacare looms nigh small employers such as myself who are near the margins of the 50 employee threshold of being an “applicable large employer for Section 4980H” have found it necessary to waste time and money just trying to figure out if we have reached that threshold or not (and yes, we already provide health insurance). At face value it seems like this should be simple enough: just count. But as with most things generated via government bureaucracy nothing is ever as simple as it seems. The statute is filled with ambiguous and undefined terms such as “stability period”, “measurement period”, “standard measurement period”, “upcoming stability period”, “safe harbor”, and so on. I’m actually trying to comply with this nightmare of a law but even our accountants admit some of the questions simply can’t be answered yet. Typical government: “Here, comply with this” – “Ok, how do I do that?” – “We haven’t decided yet, but don’t worry, if you get it wrong we’ll let you know with a fine.”
For example, there are two calculations that must be done. The first determines how many full time employees there are and the second determines how many “full time equivalent” employees there are. However a full time employee is only eligible to be measured as such if they are considered to be an “ongoing employee” (meaning they are employed for at least one “measurement period”). But… if they become full time during the measurement period or otherwise have a status change then there is a whole different set of rules for counting them – except those rules have not yet been issued (insert picture of chimpanzee with pencil scratching his head).
Assuming we have figured out who the “ongoing employees” are, we are now ready to determine if they are part time or full time. This calculation procedure all too predictably betrays the fact that whoever came up with it clearly has never worked in the private sector. They are laboring under the delusion that employees are paid on a calendar monthly basis as opposed to a weekly or biweekly basis (perhaps because governments reserve to themselves the exclusive right to pay monthly – that practice is illegal for private employers). “Fine”, you may say, there are 4 weeks in a month, what’s the big deal? Well, in fact, no, there are not 4 weeks in a month – there are up to 4.42 weeks in a month. So we cannot simply add up 4 weeks of payroll hours for a part time employee and divide by 120 to see if they exceed an average of 30 hours per week (the newly defined “full time” standard under Obamacare). No, rather than simply using data we already have (weekly or biweekly hours worked) for each employee, instead we must now warehouse up to 7-times more data by saving daily hours details. Although all employers already track daily punches, smaller employers store this massive amount of raw data off-line after getting the totals for payroll. Why waste resources if there is nothing to be gained by storing the number “8” five times vs storing the number “40” one time. The storage space is not the central issue however, it’s that we must incur a cost to reprogram payroll systems – in short wasting money to rebuild something we already had.
With monthly hour data in hand, we can now count up the employees that exceed 130 hours and count them as “full-time”. For all other employees we total up the lesser of actual hours worked or 120 and then divide that sum by 120 to get the “full time equivalents”. This means, in short, that two part time employees working 60 hours in a month will count as one full time employee. This calculation subtly explains the incentive behind large employers (such as Trader Joe’s or Kroger) who already fall under Obamacare but who are nevertheless cutting back their part time employee’s hours to below 30. This allows them to reduce their potential fine exposure. For example, in the case of Kroger, if all of their 340,000 employees work at least 30 hours, then they will be counted 340,000 full-time employees. However, if this same number of employees works only 29 hours per week, then they would be equivalent to 328,666 employees or a net potential savings of $23-34 million in Obamacare fines. That’s nothing to sneeze it at, but if you do at least you’ll be covered under Obamacare.