Recap of Last Month
Last month, was Part I of Affording the PPACA in 2014 and Beyond. Within was discussed the individual mandate, the governments role, and the beginning of the employer’s role in all of this. This month, we will complete the article and go though what business owners should consider to continue to flourish. So, to continue…..
Next is the penalty for each employee who elects to have subsidized insurance. If any employee elects to go on subsidized care, this penalty is $3000 per employee receiving the subsidy. The first 30 are included in this formula, but only applies to each full-time employee taking the subsidy. This penalty cannot exceed the first penalty explained above.
Strategies
The ACA will cause an increase in the cost of doing business for many employers. The cold hard reality is that many substantial businesses will not be able to afford being a so called “large employer”. There are ways to deal with the upcoming reality. While we do not endorse any idea as being a specific plan, businesses have a duty to carry on and keep their employees employed even if it is at the expense of other employees.
1) Convert full time employees to part-time employees
If you’re in a situation where you have 50 full time and full time equivalent employees, the easy solution is to drop some to 29 hours. Most employees do their jobs in 55-75% of the allotted time. On the plus side, you can still pay them the same amount that you would have had they been available 40 hours per week.
2) Outsource
There are always some jobs that can be outsourced. Some good examples of this are cleaning, maintenance, transportation, and even sales. The good thing here is that the necessary employee will maintain some form of employment and just as in cutting hours, the same compensation can be paid to them.
3) Lay off employees
As an absolute last resort, if it has to be done, it has to be done. One option that comes to mind is to offer voluntary lay-offs first to those who take them on a voluntary basis. The reality is that some employees would appreciate some time off and have working spouses who can sustain their standard of living. On the positive side, these people are always recallable. If staff is lost in the mean time, give them a call.
4) I’m just too big!
Some businesses in the 75 to 100 employee range are simply too big to reduce back to a small employer status. For these employers, consider selling a division to a key employee, a relative, or even a competitor. One key thing to note here, any ownership in another company, if it is a majority share, will result in the employee numbers being combined. Selling off 49% ownerships will not result in reducing employee numbers for purposes of the PPACA,
5) So what can I do to reduce costs?
Some people are just stuck being large employers and they need to be. You can get creative as long as you stay legal with what you do here. Many health problems are
caused by an individual’s behavior. Smoking and obesity are two widely known risk factors for health issues for the employee and higher premiums for the employer. Offering these people incentives and helping to curb the risks is not only good for your health insurance premiums, but also for the employee.
Let’s face it; most of us could stand to lose some weight. Most overweight people do not want to be, so why not make it a win-win situation? Offering an employee the chance to stay for losing so much as one pound a month is not a Draconian sentence and the employee will enjoy better health as a result. Smokers too can utilize many aids to help them quit as well. You can also give financial incentives to these individuals to achieve desired results. Whatever you do, make it a positive experience and you will end up with a positive result in cutting costs and having healthier workers.
Conclusion
The healthcare bill has now become law and it is now being implemented. Not only are there incentives for small businesses to cover employees and new opportunities for individuals to obtain health insurance, but opportunities to improve ourselves and our businesses await. Many see the PPACA as a negative thing for business. Let’s rise to the challenge and make it a good thing for businesses, employees, and this country.
By: Dr. Bart Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors