IRS Warns Employers: Do Not Try to Avoid ObamaCare Insurance Mandate

January 10, 2013 - 6:57 AM

Obamacare Sprint

In this March 23, 2010, file photo, President Barack Obama reaches for a pen to sign the health care bill in the East Room of the White House in Washington. (AP Photo/Charles Dharapak, File)

(CNSNews.com) – The Internal Revenue Service warned employers in a new regulatory proposal not to come up with clever schemes to avoid Obamacare’s employer health insurance mandate.

The IRS said it would soon issue “anti-abuse rules” to discourage employers from taking advantage of any regulatory loopholes.

“The Treasury Department and the IRS are aware of various structures being considered under which employers might use temporary staffing agencies (or other staffing agencies)… to evade application of section 4980H [the employer insurance mandate],” the IRS said in a proposed regulatory announcement issued December 28.

The IRS said it would issue a so-called “anti-abuse rule” in an attempt to prevent employers from using temp agencies to circumvent the mandate, essentially writing into law that even though an employer hires temporary workers and therefore is not technically under the mandate’s jurisdiction, the IRS would fine them anyway for not providing health insurance.

“It is anticipated that the final regulations will contain an anti-abuse rule,” the agency said. “Under that anticipated rule, if an individual performs services as an employee of an employer, and also performs the same or similar services for that employer in the individual’s purported employment at a temporary staffing agency or other staffing agency of which the employer is a client, then all the hours of service are attributed to the employer for purposes of applying section 4980H.”

In other words, if an employer hires someone part-time, then uses an employment agency to bring the same person on for a second part-time shift, the IRS will still hold the employer liable under the ObamaCare mandate.

Similarly, IRS said that if an employer hires the same person for two part-time stints by using two different employment agencies, it will hold either the employer or one of the employment agencies liable for the mandate’s penalties.

The issue stems from the employer health insurance mandate in Obamacare, which requires employers with 50 or more full-time employees to provide government-approved, affordable health insurance to at least 95 percent of their employees (and dependents).

If any of those employees receives government health insurance subsidies, the IRS will fine the employer up to $2,000 per employee, according to a formula outlined by the IRS.

The warning is part of proposed regulations from the IRS outlining how employers must determine whether they meet the 50 full-time-employee threshold and whether the insurance they offer meets government standards.

The IRS said that a full-time employee is one who works an average of 30 hours per week or 130 hours per month, roughly 6 hours of paid service per weekday.

The IRS also said that in order for an employer’s health insurance plan to pass muster with the government, it must be available to 95 percent of employees and cost no more than 9.5 percent of an employee’s wages.

The agency specified that employers could still fall under the mandate if they employ enough part-time workers to equal 50 full-time workers. For example, if an employer has 40 full-time workers and 20 part-time workers, that employer would be considered by the government to have 50 full-time workers and would be subject to the mandate because the 20 part-time workers average to 10 full-time workers – meeting the 50 full-time-worker threshold.