Employing Veterans May Help Avoid the ACA’s Employer Mandate

by Foley & Lardner LLP
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The new Republican Congress began its session with an attempt to narrow the Affordable Care Act’s (ACA) employer mandate by exempting certain veterans and their families from counting toward the number of employees at small businesses. Meanwhile, the U.S. Department of Defense issued a final rule, effective January 30, 2015, which will expand availability of insurance through U.S. military health care provider Tricare — the very thing that will trigger the proposed ACA exemption.

In the first weekly Republican address of the new year, U.S. Rep. Rodney Davis (R-Ill.) announced plans to quickly bring up the Hire More Heroes Act. On January 6, 2015, that Act passed the House. The legislation exempts employees with health care coverage from Tricare, or from the U.S. Department of Veterans Affairs, from counting toward the number of a business’ employees for the purpose of determining whether or not the employer mandate applies. The employer mandate took effect January 1, 2015, for employers of 100 or more full-time equivalent* (FTE) employees. It is set to take effect in 2016 for employers of 50-99 FTE employees. The goal of the Hire More Heroes Act is to incentivize small businesses to hire veterans. For example, a small business hovering around 50 FTE employees would be able to avoid the employer mandate by hiring more veterans, thereby bringing its effective count of employees below the 50-FTE threshold. Lest anyone think this is just another attempt at “repeal” facing an inevitable veto, the Hire More Heroes Act passed the house unanimously, and now moves on to the Republican-controlled Senate.

In related news, the U.S. Department of Defense issued a final rule December 31, 2014, set to become effective on January 30, 2015, which will expand the availability of Tricare, a U.S. military health care provider. The expanded Tricare Retired Reserve program will allow more reserve members of the military, as well as their survivors or dependents, to enroll in the health care plan.

While there is no guarantee the Hire More Heroes Act will become law, the overwhelming bipartisan support suggests the possibility is real, even as the White House has publicly stated its opposition to any bill weakening the employer mandate of the ACA. If it does, small businesses with just over 50 FTE employees will have a major incentive to hire veterans or their family members that qualify for the exemption in an effort to avoid the employer mandate.

* Full-time equivalent employees are generally determined by both counting employees that work over 30 hours in a week, and by aggregating the weekly hours of part-time employees and then dividing by 30, in order to calculate a total FTE. However, there are a number of other factors, such as whether an employee is seasonal. Contact your legal counsel for assistance in determining your FTEs and whether the employer mandate may apply.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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