Obamacare: What to know now

There were a lot of clues at the National Restaurant Association Show:  The crowds waiting to get into the healthcare reform education sessions. The full schedule the advisors at the NRA healthcare reform knowledge center faced every day. And the looks of frustration and bewilderment on operators’ faces—after they learned more.

The restaurant industry has a bad case of Obamacare, and not everybody knows what to do about it.

“I feel overwhelmed,” said Kristina Mazza, director of operations at five-unit Lux Restaurant Group in Indianapolis.  “We just started gathering information a couple of months ago. There’s a lot.”

“Let me put it this way,” said Rick Weisser, owner of seven-unit Fryn’ Pan Restaurant in Sioux Falls, South Dakota, “I’ve listened to a half dozen webinars and I’ve attended seminars. I listen and I feel like I’m educated. Then I go to the next seminar and everything has changed.”

Trying to figure out how the new law will impact any single restaurant brand is difficult enough. But add to that the fact that many of the law’s rules have not been defined yet, and you begin to understand the level of concern and anger many NRA attendees expressed.

Even with many of the requirements yet to be defined, there are specific actions restaurants should be taking right now, said Michelle Neblett, director for labor and workforce policy for the NRA.

“The best case scenario right now is that operators know whether they are small or large [as defined by the law] and know what their options are,” Neblett said.

Know your size

The cutoff point for the law is 50 full-time equivalent employees. Fifty or more and you are an “applicable large employer” and you have to provide insurance to all full-time employees. Less than 50 and you aren’t required to provide insurance to anyone, but you do have other requirements.

First, here’s the calculation to determine your size as laid out by the NRA. Like everything having to do with this law, it’s not simple. Here it goes:

Step 1: For each of the 12 calendar months in the preceding calendar year (or any six consecutive months in 2013, to determine status for 2014), an employer must determine how many employees (including seasonal employees) averaged at least 30 hours of service a week over the month, or 130 or more hours of service in a calendar month. That will be the number of full-time employees you employed during that calendar month.

Step 2: Add the hours of service of all other non-full-time employees (including part-time seasonal employees), but do not count more than 120 hours per person per calendar month.

Step 3: Divide the total hours of service for non-full-time employees by 120. That determines a full-time-equivalent number for non-full-time employees.

Step 4: Next, add the number of full-time employees to the number of equivalents, to get the total number of full-time-equivalent employees for that calendar month.

Step 5: Repeat the process for each of the remaining 11 months. Add each of the 12 numbers together. Divide by 12 for the average annual full-time-employee-equivalent number. That is the number employers must use to determine whether they are considered applicable large employers. (For 2013 only, employers can use as few as six consecutive months to determine their status as a large employer for 2014. Employers must begin their measurement no later than July 1, 2013.)

Know your team

You can do this calculation on your own, of course, but it’s going to be important to bring in some professionals to help understand your obligations under the law.

Your tax advisor. A tax attorney is going to be important to have on board for a number of reasons. One question that is vexing many operators concerns common control. If there is an umbrella corporation with several businesses underneath it, are they considered separate when calculating their size or all together? If you have partners, does that impact the structure of the company and its obligations? Nebblet says those questions are best posed to a tax attorney. And if you determine that you are a large employer, you need to get up to speed on reporting requirements that kick in January 2015, but that will have to be tracked through 2014. Again, a tax attorney can help you with this.

Your employment attorney. It’s going to be important to bring this guy in, says Nebblet, to help ensure that in meeting the demands of healthcare reform you don’t inadvertently run afoul of other laws, primarily non-discrimination laws.

Know your deadlines

The first is October 1 and applies to every business, whether it’s big or small. By that date, any business that is required to pay minimum wage—again, everybody—must notify their employees about healthcare coverage options. They must let employees know about their state’s healthcare exchange—which will be up and running by October 1—the exchange’s contact information and what the exchange offers.

Further, as the NRA spells it out:

  • Inform the employee that they may be eligible for a premium tax credit if the employee purchases a qualified health plan through the exchange; and
  • Inform the employee that if they purchase a qualified health plan through the exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of the contribution to employer coverage may be excludable from income for federal income tax purposes. This means plans bought on the exchange will not have the same tax benefits as employer-sponsored coverage.

Clear as mud?

If you want to simplify the process, you’ve got a couple of options. The Department of Labor has issued “model notices” that employers can use instead of drafting their own. The NRA also has set up a website that simplifies the notification process. The site, which also has the DOL notices, is at http://healthcareadvice.com/.

The next important date is January 1, 2014. Employers with 50 or more full-time-equivalent employees must offer coverage to full-time employees or face penalties by then. Also on this date, the individual mandate kicks in, which requires everybody to have insurance. So employers with fewer than 50 FTEs have to make sure they have insurance of their own.

Finally, large employers must start adhering to new tracking standards for their employees, which they will have to submit January 31, 2015, and every year after. Reporting guidelines have not yet been finalized and you should speak with your tax advisor to stay up to speed.

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