To a small business owner like myself who doesn’t think in terms of handouts and entitlements but only how best to keep a happy and productive workforce the precepts behind ObamaCare are mind bending. Conversations similar to the one below are happening between business owners and their CPA / Tax Attorney / Insurance Agent and Financial Advisor are happening all across the country. The results are historically predictable in that anytime the Social Mafia rears their head and attempts a class warfare end game to establishing a 2 class system, the ones they purport to want to protect, are always the ones who take it in the shorts. The following was relayed to me, but could be and most assuredly is happening hundreds of times a day.
“My business provides jobs and income ( above minimum wage and a combination of hourly and salaried ) to about 120 people on any given day. We employ mostly young americans, 20 to early 30 somethings. We have historically provided partial 50% premium coverage for medical, dental and vision insurance to our employees but have managed the administration at no cost if they choose to add their spouse or dependents to their plan. We also pay for the administration of an AFLAC and 401k plan. Our employees have been happy, and we experience low turnover over for our industry even though there is rampant competition in our area.
And so comes Obamacare. What will now have to happen is a simply crazy game of mathematical gymnastics to maintain profitability which will drastically change forever our relationship with our employees due to the draconian redistributive mandates of the Affordable Care Act.
This is an example of the real world calculations that now come into play.
#1 – We have 120 employees so we know we will have to participate in the Affordable Care Act.
#2 – The next calculation is out how many full time employees we had. Using the administration’s formula we established that we had 38 Full Time Equivalent employees by taking our total number of hours and dividing by 120 for the single month last year that had the highest number of employees on the books. The 38 employees include 17 full time salaried managers and 21 hourly employees who are transient in varying degrees in that they are in college, considering their career, just out of high school, etc.
#3 – Since we would be liable for 75% of the 38 employees premiums, ( we pay 50% now ), and 66% of their dependents coverage, ( we pay zero now ) 38 is of course too high a number. We know that immediately we need to cut down that number of Full Time hourly staff and since our organizations are field managed, the safest number to manage is zero full time hourly employees. So immediately 21 employees who used to be fully employed by us will go to part time status, have to get second jobs, which will increase turnover, etc. By capping all hourly employees at 28 hours per week, we eliminate the first part of the problem. Will good employees leave us? Maybe. But I don’t know where to since EVERY business like ours in our service area is having the same conversations with their advisors as we are, so I don’t think competitively we miss a beat.
#4 – That will leave us with 17 Full Time Salaried employees. ( Very few of them now participate in healthcare at all, but under O-Care we have to provide insurance to them unless we eliminate our insurance plan and pay the penalty .. )
$5 – BUT – If we eliminate our health coverage all together, these individuals can now go the exchange, and as a company we can take advantage of the 30 person exclusion on penalties and avoid the penalties all together. (an interesting off shoot of this is that our revenue actually increase now that we will not be paying 50% of the healthcare premiums for these employees who “used to” participate in our plan.)
And will THAT cause us a competitive disadvantage ? Not really. We actually provided more benefits to our employees than most so now we are competitive with everyone else who owns a business like ours and who is now doing the same thing and having the same planning conversations.
#6 – Now we are having a meeting with our Tax Attorney to discuss how to manage our income below the threshold of $250,000, perhaps buy more hard assets that we can sell in the Next Administration. ”
I have an old saying that my Dad taught me over the years before he died well into his 90s. He had seen a lot. The REAL Poor will always be taken care of, the Rich and those in Business will always find a way – but the middle class, those easily ginned up by envy or greed become pawns in the Socialists Class Warfare strategy. Historically they were called useful idiots. The ones who really need to be protected from themselves, Always pay the price.