Date: Apr 07, 2015
Category:
Work with Farm Labor Contractors? Beware of Non-Compliant Health Plans

The Patient Protection and Affordable Care Act’s (ACA) large employer mandate requires employers to offer affordable, qualifying coverage starting this year. As a business person, you have myriad plan options available, and the choices can be confusing. Western Growers is here to help. 

Farm Labor Contractors: Avoid Pitfalls

You may use farm labor contractors (FLCs) that are large employers. These FLCs must comply with the large employer mandate. It is up to you to know whether the coverage your FLC has purchased and invoiced you for is compliant.  If the plan the FLC offers is not compliant, problems may arise. 

For example, if the plan the FLC offers does not meet the law’s requirements (e.g., is not minimum value) and the IRS assesses tax penalties, the penalty will be levied against the “employer.” On the surface, that may sound safe for you. After all, the FLC is the employer, right? Not necessarily.

The IRS conducts a common law multifactor test to identify the “employer.”  The “employer” is typically the entity that holds the power of control (the right to hire, direct work and/or terminate employees). If there is a clear split between you and your FLC, your company’s risk is minimized. But if the lines are unclear, you could be saddled with what you thought to be the FLC’s large employer mandate responsibility. In other words, the IRS could look to you as the “employer” and responsible party for large employer tax penalties. 

What is the Large Employer Mandate Obligation?

To avoid potential tax penalties, at least once a year large employers must offer substantially all full-time employees and dependents the chance to enroll in health benefits coverage that meets minimum value and is affordable. 

Your company might be hit with a tax penalty if a full-time employee goes to health insurance exchange and qualifies for subsidized health benefits coverage based on his or her income if your company:

  • fails to offer any coverage; or
  •  offers coverage that does not meet minimum value and/or is unaffordable.

How to Tell Whether a Plan Meets Minimum Value and Affordability

To meet minimum value, a large employer offering a plan after November 3, 2014, must provide a health benefit plan that provides at least a plan design equal to 60% actuarial value with substantial coverage of inpatient hospitalization and physician services. This means your company’s plan has to cover hospital stays and doctor visits.

An affordable plan is one that puts an appropriate ceiling on the employee’s share of the cost. This means your company can ask employees to pay up to 9.5% of

  • W-2 wages,
  • rate of pay or
  • the federal poverty level

for employee-only (self-only) coverage.

If your company offers a plan, it must offer the plan to dependents. But it can require employees to pay 100% of the dependents’ cost. 

Resources, Tools and Consultation

If you are unsure whether your plan or your FLC’s plan meets the law’s requirement, we are here to help. Contact us immediately at 800-333-4942 or email gnelson@wga.com.

WG Staff Contact

Jonathan Alexander
General Counsel, WGAT
949-885-2330

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