WAGUESPACK: A Scary Diagnosis

Mike Bertaut’s message is frightening.

Last week, this well-respected health care economist served as the keynote speaker for LABI’s “Business Solutions Beyond Reform” panel to discuss the impact of Obamacare on Louisiana businesses. He was articulate, well informed and effectively explained a very complex subject in easy-to-understand terms. He, along with other panelists, hammered home the point that businesses need to be on red alert for the next phase of Obamacare implementation in 2015.

My takeaway from the discussion was clear:  employers must do everything they can to prepare in 2015. Next year, the trap gets set so that in 2016 the IRS auditors can come knocking on the door of all these trapped employers looking to assess big fines and penalties across the country.

As a result, businesses across Louisiana are starting to ask themselves some important questions to prepare for this audit trap.

How many full-time employees do I have? Am I a large employer or small employer in the eyes of the IRS? Do I qualify for transitional relief from the new mandates and regulations? How will the IRS define “affordable” health care? What fines and penalties await me if I make a mistake complying with this new maze of regulations, mandates, laws and executive orders?

Private businesses are not the only employers starting to feel anxious about this federal tripwire being wrapped around their office. Public employers are feeling the pinch as well, with local school districts across the state trying to downsize their employee rolls to prepare for this new employer mandate.

As an example, The Advocate this week cited Lincoln Parish as a school district that has trimmed weekly hours for 400 substitute teachers, maintenance workers, food service and other employees to a level below the 30-hour-week mandate required in Obamacare. Other districts are taking a similar approach to reduce their employee rolls in order to comply with Obamacare. In regards to the mandate to provide coverage to part-time employees working more than 30 hours a week, Ascension Parish Superintendent Patrice Pujol said, “Given the cost of benefits, that would be an unbelievable drain on school systems.”

Unbelievably, Obamacare is incentivizing private and public sector employers to scale back employment in order to comply with overly expensive and complicated mandates in the law. As we slowly try to pull ourselves out of the grips of the national recession, this is exactly the wrong type of federal mandate at the absolute worst possible time.

So, let’s go back to that sobering advice given by Mike Bertaut.

The first message that stood out was that employers must determine how many full-time employees they have per the IRS. The 30-hour requirement is clearly part of the law, but the definition of “employee” is more expansive than some may currently realize. Obamacare says that employers must count any employee as defined by the “common law” rules. This means you must count any worker that you can “control what will be done and how it will be done.” In essence, contractors and other affiliated groups may be a part of your employee count by the IRS for Obamacare purposes, even if traditionally the business has not viewed those workers as employees. Count incorrectly and that 2016 IRS audit will be an expensive one.

Next, if you meet the 50 full-time equivalent threshold and you do not qualify for transitional relief from the law’s onerous requirements, you then have to assume compliance starting next year. This means you must start providing “affordable” health coverage to your employees or risk heavy fines for either (a) not covering enough employees or (b) not providing “affordable” coverage. There are a few different complicated and bureaucratic formulas to determine what is “affordable,” and you can bet your bottom dollar that provision will be the epicenter of a lawsuit bonanza for years to come.

Why would Washington penalize growth and investment at a time we need it so badly?

When I travel around the state and visit with our business members, they are generally excited about their prospects. They see hope on the horizon that the economy is improving and believe they will finally start recovering from the last several years of hardship. They speak of how hard their employees work and how much they contribute to the company culture. They also speak of numerous other job openings available and how they want nothing more than to employ even more young Louisianians.

That hope is in peril thanks to the instability Obamacare is bringing to employers in 2015 and the expensive IRS audits waiting for them in 2016. Complying with the maze of mandates and regulations will be difficult, especially for those trying to do the right thing and grow their business next year. The more you grow, the more likely you are to be caught in one of the many Obamacare IRS traps.

A healthy economy leads to healthy wages that produce healthier outcomes for those that need it the most. Instead of embracing this concept, Washington has injected a virus in our economy that will weaken job growth and flat-line economic expansion. If this doesn’t scare you, I don’t know what will.

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