The challenges created by PEOs, staffing agencies and other similar employment arrangements have caused a great deal of confusion and consternation with respect to PPACA's Employer Mandate.
Minz Levin is one of the firm's that has done a very good job in continuing to address the matter and provide practical guidance. Here is an excerpt of
their latest:
... Recognizing the unique challenges posed by three-party employment arrangements, the preamble to the final regulations explains the problem and introduces the regulatory solution as follows (79 Fed. Reg. p. 8,566 (Feb. 12, 2014)):
“[I]f certain conditions are met, an offer of coverage to an employee performing services for an employer that is a client of a professional employer organization or other staffing firm (in the typical case in which the professional employer organization or staffing firm is not the common law employer of the individual) . . . made by the staffing firm on behalf of the client employer under a plan established or maintained by the staffing firm, is treated as an offer of coverage made by the client employer for purposes of section 4980H. For this purpose, an offer of coverage is treated as made on behalf of a client employer only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay to the staffing firm for the same employee if the employee did not enroll in health coverage under the plan. (Emphasis added).
The rule itself appears in Treas. Reg. § 54.4980H-4(b)(2), and it provides, again in relevant part, as follows:
For an offer of coverage to an employee performing services for an employer that is a client of a staffing firm, in cases in which the staffing firm is not the common law employer of the individual and the staffing firm makes an offer of coverage to the employee on behalf of the client employer under a plan established or maintained by the staffing firm, the offer is treated as made by the client employer for purposes of section 4980H only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan. (Emphasis added).
Neither the preamble nor the final regulations explain the rationale for the requirement of an additional fee. The backstory has it that the Treasury Department and the IRS were worried about giving a common law employer who neither offered nor paid for coverage credit for Code § 4980H purposes for coverage provided by another entity. The rules governing offers of coverage by unrelated entities also apply to collectively bargained multiemployer plans, which too are offered by separate, unrelated legal entities but into which the common law employer makes contributions based on the terms of a bargaining or joiner agreement. There is, however, an important difference. While contributions to a multi-employer plan are set by the collective bargaining process, the final regulations offer no indication of what an appropriate additional fee might be in the context of a staffing firm or professional employer, or even how and when that fee must be assessed. ...
What is the proper amount of the additional fee?
For the first few years following the Act, there arose a debate about the extent to which the costs of ACA compliance would be shifted to clients. Early on, clients appeared to resist the idea that they would need to shoulder these costs. But in the run up to 2015, when the employer shared responsibility rules take effect, there appears to have been a shift in attitude. Clients are generally willing to subsidize the costs of ACA compliance, but they are insisting that their staffing firms rein these costs in with smart compliance strategies, and they are demanding transparency in pricing.
The additional fee requirement gives staffing firms a basis to pass through at least some of the costs of compliance. At one end of the spectrum, the additional fee could equal the substantiated cost of compliance. At the other end, the additional fee could be a nominal amount per hour (or some other period). But to date, no standard has emerged to tell us how much the additional fee ought to be. ...
Link to full post.
