About seven months before the Affordable Care Act's "play or pay" employer responsibility provisions take effect, the Internal Revenue Service is still finalizing regulations for questions like whether seasonal tourism workers or part-time school instructors qualify for coverage and how to calculate hours across corporate structures.
After receiving about 500 comments on the proposed "shared responsibility" rules -- which could make an already complicated tax code even more so for businesses and organizations employing more than 50 people -- the IRS and Treasury Department held a public hearing on April 23 to give employers, unions and other stakeholders another chance to weigh in.
School districts and teachers unions, for instance, are particularly concerned, for slightly different reasons.
The American Federation of Teachers is worried that the IRS' proposed guide for calculating full-time employees might encourage education employers to reduce some teachers' hours, which the union emphasized in comments was not the ACA's intent, while some school districts are wondering how the rules may affect their budgets for teachers' aides, special education instructors and cafeteria staff.
The Fort Wayne Community Schools, the largest school district in Indiana, urged the IRS to allow educational employers to include breaks such as summer vacation in calculating employees' full- or part-time status, based on the 30-hours-a-week full-time equivalent definition.
The Fort Wayne district has estimated the proposed rule would cost $10 million in insurance costs to "play," or $8 million in fines to "pay," for the 841 district instructors and cafeteria staff who work 30 hours a week during the school year, as the Fort Wayne Journal Gazette reported.
The Fort Wayne district's CFO, Kathy Friend, said in comments that if "the regulation does not change, in order to avoid this dramatic increase to our budget, we would likely decrease the number of hours worked by these individuals where possible."
That's something some colleges and universities are already starting to do with adjunct faculty, since 2014 full-time equivalent calculations will be based on this year's records under the IRS' proposal, as the Chronicle of Higher Education reported recently.
Corporate employers, meanwhile, are seeking greater flexibility in calculations of coverage requirements, with many large and multinational firms employing a range of salaried employees, part-timers, temporary workers and independent contractors.
"Perhaps more than any other feature of the Affordable Care Act, the employer shared responsibility rules pose vexing, and potentially costly, challenges to 'applicable large employers' as they endeavor to comply," said Alden Bianchi, a Mintz, Levin attorney testifying on behalf of the ERISA Industry Committee, an association representing large employers with benefit plans covered by the Employee Retirement Income Security Act.
The ERISA Committee is urging the IRS to amend the proposed rules to allow different methodologies for counting hours for full-time, part-time and variable hour employees, and to allow employees' hours to be calculated separately across operating divisions and subsidiaries (or "controlled groups" as defined by the tax code).
The group said it "would be incredibly costly for large companies to create complex systems to track the hours worked and coordinate many different measurement and stability periods for multiple controlled group members on a monthly basis."
As employers and unions wait for further guidance or finalization of the shared responsibility rules, the IRS is also holding a hearing May 29 on minimum essential coverage rules and the individual mandate.
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