The IRS Gets Mean

The health care law set the threshold for large-employer penalties at 50 full-time employees and full-time equivalents, but left the definition of those terms up to the IRS. The agency has proposed counting all employees who work an average of 30 hours per week as full-time workers and calculating full-time equivalents by adding up the total number of hours worked by part-time employees each month and dividing by 120. Thus, a company with 45 full-time employees and eight part-timers who each work 85 hours per month (about 20 hours each per week) would be subject the large-employer coverage mandate (5.66 full-time equivalents + 45 full-time employees = 50.66 employees).

No wonder employers aren’t hiring.

More on new regulations for small business owners in the Washington Post.

Comments (6)

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  1. Evan Carr says:

    30 hours a week is considered full-time? Not in any company I’ve ever worked in! AND the vacation I take at my part-time job could push me over the full-time threshold?!

    I should probably quit working so hard, I don’t want to be penalized for any success I might achieve.

  2. Jardinero1 says:

    Here is the money quote: “But for the first year, to ease the transition, regulators have included a provision that allows them to count their employees for any six-month period in 2013 to determine their size status for 2014.”

    The upshot is that this gives employers, in states without state healthcare exchanges, standing to sue about the penalties, a year earlier than predicted since the IRS will allow this extended lookback period of a year for employee counting purposes. As it were,the soonest employers would have standing would have been 2015, which was considered the first year they would be subject to the penalty. Now a firm could legitimately have standing to challenge the penalty in late 2013 or early 2014, Since the IRS will probably consider the employee census that far back.

  3. Andrew O says:

    Not too familiar with this law and the logic behind it, but why is there such a threshold? Is it to somehow protect hospitals or smaller clinics from being subjectived to more competition? I’m sure there is a more logical reasoning? Regardless, the 30hr/week full-time definition is baffling and people (especially doctors) ought to demand explanations for such seemingly arbitrary penalties.

  4. Virginia says:

    For starters, last thing I heard a full-time worker works at least 40 hours a week, not 30.

    If they are going to base these new regulations off of inaccurate information then why even bother make regulations in the first place? Just make something up and call it a law.

    It sure is hard to find, even more to keep a job these days. So, those of you who do have a job…whether you enjoy it or not…appreciate it while it lasts!

  5. Linda Gorman says:

    OCare architects likely picked 30 hours so that they would collect what they thought would be the majority of workers and prevent employers from skirting OCare requirements by instituting, say, a 39 hour week. Many of the architects act as if they believe that the economy still operates in the same way it did in 1960, except with the addition of Apple products. They also seem to believe that if reality doesn’t fit their template then reality must be forced to do so.

    OCare just imposes standard big corporate 1960s style health insurance and practice organization on everyone and assumes that everyone gets a regular salary. Apparently they were counting on the 1099 reporting requirement for virtually every purchase to collect the rest of the (relatively current) employment data. Fortunately, Congress put a stop to that particular madness.

  6. Don Levit says:

    I am glad you provided this article, for it stresses the importance of part-timers counting toward full-time-equivalents.
    A restaurant chain could have 400 part-timers, but still have 200 FTEs.
    If they do not provide insurance, then the fine is what, $2,000 per employeee after the first 30 employees, right?
    If so, this restaurant chain would have a fine of $340,000 (200-30 X 2,000, right)?
    Don Levit