Under Obamacare or the Affordable Care Act employer mandate, it is specified that businesses with 50 or more full-time equivalent employees (FTE) must provide health coverage to at least 95% of the employee population, including their dependents aged 26 years and old below. Part-time employees are excluded from the mandate. Because of this, more companies are now converting full time employees to part-timers in order to avoid mandate compliance. This is why a lot of Obamacare opponents are saying that the Affordable Care Act is turning America into a country of part-time employees. But there are more to the story than what seems to be obvious facts.
What Is Considered Part Time Employment Under Obamacare?
An employee must work more than 120 days in a year with an average of less than 30 hours a week to be considered part-time. Basically, if you work less than 130 hours per month, then your status is under part-timer. For the purpose of forcing employees to comply with health benefits mandate, work hours in part-time status was lowered to 30 hours a week, which turned out to be a bad idea. Because now, to keep a worker from accidentally going over the part-time mark, employers limit an employee’s work week to up to 27 hours as a ‘safe harbor’. Simply put, employers found a way to avoid the mandate.
What Is a Full-Time Equivalent Employee?
A full-time employee is someone who works an average of 30 hours or more per week. IRS further defined full-time employment as work rendered an average of 130 hours or more per month. Full-time equivalent employee is calculated based on the total part-time hours that a worker has rendered and then divide it by 120. This means, a worker’s part-time hours can turn out to be full time based on FTE, and eligible for health coverage based on the employer mandate.
Is It Still Possible For An Employer To Be Fined If There Are No Full-Time Employees At All?
Yes. Fines are also imposed on companies with only seasonal and part-time employees, but where a combination of work hours reach 120 hours per month or around 30 hours per week are counted as one. This can spell bad news for seasonal businesses as they would have to provide health insurance benefits to workers who would only be around for a limited period of time.
What Penalties Will Employers Have To Face If They Don’t Offer Health Coverage To Full-Time Employees Or Full-Time Equivalent?
Large employers would have to pay a fine of $2,000 for each employee that are not offered coverage. Even if a company has only 20 uninsured employees, excluding the 5% specified on the mandate, the tax penalty can still have a major toll on its finances. This is reason enough for businesses to reduce full-time employment and to ensure part-time workers only render an average of 27 hours a week. Under the circumstances, it is foreseen that nearly half of the nation’s workforce will see significant changes in their incentives under Obamacare.
Is Obamacare Total Bad News To a Part-Time Employees?
As a part-time worker, you may not be offered insurance by your employer, especially if you work less than the prescribed hours specified in full-time employment or full-time equivalent. This may seem a bad idea, but you and your family may qualify for cost assistance through the health exchange, where you can enjoy minimum coverage at a lower monthly premium. So not only are you working less than full time employees, but you’re also paying less on health coverage.
Under Obamacare, your family’s eligibility for exchange subsidies greatly depends on your employment status. In any month that you work part time or you do not work at all, you can obtain subsidized coverage. After accounting for taxes, work expenses and health expenses, you would have higher net income per year than those working full time.
How Does Employer Mandate Affect Small Businesses?
In a nutshell, a small firm with less than 50 full-time equivalent employees does not have to comply with the employer mandate. This is why it is very important to calculate the number of FTE within a company to determine whether a company is large or small. Say a business is considered small and not subject to the employer mandate. In order to avoid compliance, companies would prefer not expand and grow, which means fewer jobs will be created. They would also stick to hiring part-time employees or outsource work, which can lead to inefficiencies and lack of full control over the quality of the services rendered or products delivered.
What is the Save American Workers Act?
This is a U.S. bill designed to amend the Affordable Care Act as a means to protect part-time workers, and how employers are cutting back their work hours so they are not offered health coverage. Under the Save American Workers Act, the number of work hours that a full time and part time employees have to render are amended. If you work for 40 hours or more, you will be considered full-time employee. For full-time equivalent the total of part time hours would be divided by 174 or roughly 40 hours a week. In this arrangement, fewer companies will be subject to the employer mandate. It will also discourage employers from cutting back work hours, especially for part time employees. Unfortunately, the Save American Workers Act will encounter the same problems that the original employer mandate is experiencing. This is because employers would cut full time workers’ hours down to 38 to avoid the mandate.
Like most things related to the Affordable Care Act, the employer mandate has both a positive and negative effect to part-time employees, and the employers who employ them. So, it is wrong to blame Obamacare for causing a part-time economy, as what most opponents claim. Part-time employees may not have access to employer-sponsored health coverage under the mandate, but they will have access to subsidized and generous assistance for health insurance premiums.