How Obamacare’s ‘Aggregation Rule’ May Affect Small Business Owners

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obamacare-630Though there are many entrepreneurs and unemployed individuals singing praises of the Affordable Care Act and its ability to provide affordable health insurance to millions who would otherwise be priced out of health care options, there are several small business owners who deem certain rules and regulations surrounding the ACA to be detrimental to their business efforts. According to an aggregation rule within the U.S. Tax Code, if you are a small business owner and employ 50 or more people on a full-time basis, you may be required to provide health care for these employees even if the total number of employees is spread across numerous business efforts.

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For example, as reported in The Wall Street Journal, Donna Baker is an owner of an accounting firm, a payroll company and a retail store. She additionally is a minority stakeholder in her husband’s farming business. Though all of her business undertakings are separate entities, the fact that all four businesses currently (in aggregate) employ over 50 full-time employees, she may be subject to this aggregation rule and may be required to offer health-insurance benefits to her combined full – time staff.

Why is this a big deal?

Many small business owners have become paralyzed with financial fears that may come along with this new expense and have chosen to either

1) curtail any expansion and hiring efforts to avoid having to pay this new expense and/or
2) have let some employees go or have cut their hours so they will be deemed part – time employees.

As of now, this mandate defines all full-time employees as those who work more than 30 hours per week.

A Congressional hearing on the matter was held in December and included testimony from several business experts, such as Debbie Walker, an accountant with more than 35 years of experience. Ms. Walker believes that many entrepreneurs won’t realize they are subject to the law’s aggregation rules – which apply mainly to entrepreneurs who own assets or have financial stakes in multiple businesses – until it is too late. She believes that the rules are “just too complicated.” Several business owners have seen their expenses balloon to an additional $50,000 to $350,000 per year in order to be in compliance with this mandate. These costs are then passed down to their customers via increased prices for goods and services, or to the employee through high deductibles and premiums.

Though this aggregation mandate was put into place to prevent businesses from “skirting the law” should they have several business entities and more than 50 full –time employees across these entities, it has placed small business owners in a space of fear which may stunt growth in job opportunities created by these entrepreneurs.

So what do you think? Will this “Aggregation Rule” assist in making small business owners accountable to the Affordable Care Act, or is it a recipe for disaster which does not help the job climate at all?

 

Rashida Maples, Esq. is Founder and Managing Partner of J. Maples & Associates (www.jmaplesandassociates.com). She has practiced Entertainment, Real Estate and Small Business Law for 9 years, handling both transactional and litigation matters. Her clients include R&B Artists Bilal and Olivia, NFL Superstar Ray Lewis, Fashion Powerhouse Harlem’s Fashion Row and Hirschfeld Properties, LLC.

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