I've been reading a lot about Obama Care, and thinking about how it will affect small business. Basically, if your business has more than fifty full time employees, it is not good. For the purposes of the Health Care Act, a full time employee is defined as one who works 30 hours per week. And the testing period to determine how many full time employees a business has is the calendar year preceding the year to which the Act applies. Since the insurance portion of the Act (Employer Shared Responsibility) is effective after 12/31/13, the 2013 calendar year is the testing period for 2014. If you plan to rearrange your workforce to fall below the fifty full time employee threshold, you should start working on it now. Since the test is based on annual averages, if you wait until the end of 2013 to address this issue, you will be too late.
The Act contains penalty provisions for businesses that fail to comply with the insurance requirements. For businesses that do not comply, it appears that the penalty is $2,000 per employee, after the first thirty employees. If your business has eighty full time employees who are not covered by health insurance, the penalty will be $100,000 per year. I observe many business owners who say that they will pay the penalty rather than provide health insurance, but I don't know if that is a wise choice. For federal tax purposes, penalties are not deductible expenses. To decide if the penalty less costly than the insurance coverage, one must analyze and compare the after tax cost of each.
For businesses that are labor intensive and low margin, the health insurance requirement will be devastating. It is unfortunate that President Obama has never run a business. Perhaps if he had, he would understand what he has done.
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