The Affordable Care Act (“ACA”) provision also known as Employer Shared Responsibility, mandates that employers who generally employ 50 or more full-time equivalents must offer group health insurance benefits to its full-time employees and their dependents or potentially pay a penalty. Employers can determine whether they meet the 50 or more full-time equivalent threshold for January 1, 2014 by using selected information from 2013. An important note, if two or more companies are “related” then the companies may be combined by the government for purposes of determining if the companies are subject to the Employer Shared Responsibility provisions.
Control group and related entities’ rules can be found in the Internal Revenue Code, including but not limited to, sections 414(b) and 414(c), which generally provide that employees of all companies which are members of a controlled group of entities and employees of trade[s] or business[es] (whether or not incorporated) which are under “common control” are to be treated as employed by a single employer. Companies with as little as 20% of common ownership may be considered part of a control group, while companies with 80% common ownership are usually presumed to be “related”. Another area that needs to be considered is affiliated service groups which provide integrated services to the public, parent-subsidiary, brother-sister entities and “family members” with ownership that may be attributed to a related person’s individual ownership interests. In addition, smaller entities with five or fewer persons which could include trusts are also legal entities which should be considered when deciding on who is part of a “control” group.
Lastly, the IRS has proposed anti-abuse provisions which will penalize employers who attempt to avoid the mandates of ACA. As always, please speak with competent legal and accounting professionals to address your specific circumstances.