Beginning in 2015, a farm that is an “applicable large employer” (ALE) generally must either provide health coverage to full time employees and their dependents, or pay a penalty for not offering coverage. Generally, a penalty is triggered if an employee of the farm business is offered coverage by the farm business that does not meet the minimum guidelines or if an employee obtains coverage through a Marketplace exchange. The rule that requires the farm business to either provide coverage or pay a penalty has become known as the “play or pay” rule under the Affordable Care Act (ACA).
At this point in 2014, there are several aspects of the ACA that farmers with employees should know about in order to determine how this law affects them. Questions that farmers have regarding this law and its impact on their farm business include the following.
- Is my farm business subject to the mandate or it is exempt?
- Is there any deferral of this mandate for my farm business?
- If I want to offer coverage to full time employees so I don’t have to pay a penalty, what are some of the requirements that the coverage must meet?
- How much is the penalty if I do not offer coverage?
COUNTING FARM BUSINESS EMPLOYEES
The farm business is subject to the “play or pay” rule if it falls under the definition of an “applicable large employer” (ALE) under the ACA. A farm business is an ALE if the farm business employed an average of at least 50 full-time employees on business days during the previous calendar year. Under the rules for counting employees, in order to determine whether the farm business has over 50 employees, the farmer must add together:
- All full time employees, and
- Part time employees that will be treated as “full time equivalents” (FTEs).
A full time employee under the rules is an employee that was employed at least 30 hours per week or 130 hours in a calendar month. Part-time employees are counted by adding up the total number of service hours for the month for all part-time employees and dividing that sum by 120.
Example. Liverpool Farms, Inc. (Liverpool) has 17 employees, each of whom works an average of 33 hours per week in each month of 2014. In addition, there are 48 part-time employees. Each of the part-time employees averages 80 hours of service each month for 2014. Liverpool must determine whether it is an ALE for 2015 based on the number of their employees and the average hours the employees have worked during 2014. Liverpool makes this determination using the following calculations.
First, the 17 employees who average 33 hours per week in each month of the previous year are counted as full-time employees because these employees have worked at least 30 hours per week each calendar month for the preceding year.
In addition to the 17 full-time employees, Liverpool must calculate the number of FTEs to determine whether it has 50 or more full-time employees.
Number of FTEs = Aggregate number of hours worked by all part time employees / 120
= 48 part time employees