Makes Cents to Comply with the Affordable Care Act

Regardless of whether you support or oppose the Affordable Care Act, you and your employees are probably thinking about how it’s going to change your lives.  Construction businesses rely greatly on their human capital. If inexperienced or careless workers make mistakes, and the work has to be redone, “cheap labor” quickly becomes expensive. Employee turnover has cost implications too – it takes time and resources to train new employees.

How does healthcare reform play into this? In just over six months, every individual in the U.S. will be required to have health insurance.  The best and most highly skilled workers are likely to look for employers who offer health insurance.

The Affordable Care Act will affect large and small businesses.  Companies with 50 or more full time employee equivalents (FTEs) will be subject to penalties if they fail to provide health insurance. Some large employers are considering reducing the number of full-time employees on their payroll so they don’t have to comply.  But workers who are willing to settle for part-time work may lack critical skills, and may not be as loyal to their employers. Some large employers are considering simply paying the penalties. For government contractors who work on prevailing wage jobs, this makes no sense. The fringe portion of the wage is intended to be used to provide benefits for workers, and doing so results in significant savings on payroll burden. That translates into tax savings for both you and your workers.

Employers with fewer than 50 FTEs should not ignore the implications of the mandate for all individuals to have health care. Failure to offer health insurance for your employees can have serious consequences for your “human capital.”

1. Most people in the workforce are just one serious illness away from financial hardship and medical debt. Should one of your workers or their family members become ill, and lack health insurance, the financial stress is sure to affect their morale and productivity.
2. Failure to offer health insurance is an invitation to employee turnover. The most skilled and experienced workers are likely to seek an employer that offers coverage, particularly if the alternative is having to navigate the marketplace and/or exchanges on their own. A recent draft of the “E-Z” form being developed by the U.S. Department of Health and Human Services  to determine if a person qualifies for subsidies is 21 pages long.
3. Smaller government contractors will be competing for public works contracts with large companies that are subject to the mandate. Large employers that use fringe dollars to provide health insurance will realize significant savings on payroll burden, which in turn makes their bids more competitive. How will you gain an edge to keep your workers employed and your business profitable?

There are tax credits available for smaller employers who offer health insurance coverage which meets minimum standards under the Affordable Care Act. To find out if your business qualifies, view the calculator on the IRS website.

At The Contractors Plan, we’ve focused on providing benefits for government contractors, and keeping contractors in compliance with applicable laws, for more than 30 years. We can help you devise a strategy that helps you use the ACA and fringe benefit dollars to the advantage of both your company and your employees. Contact us to learn how we can help you meet ACA deadlines and save on payroll burden.