Minding Ag's Business

More Punishment for Small Employers

Family businesses often stretch themselves to offer at least some of their employees insurance coverage. For example, one Mississippi Delta operation I know pays 100% of the premiums for eight full-time employees (family members and key managers), but the remaining eight employees must pay coverage on their own. Their separate but family owned trucking firm provides its drivers no insurance. Other farm family businesses might insure only their most senior employees.

It's such a struggle to persuade talented non-family managers to work on farms, owners see insurance as a recruitment technique. They know they're competing with fertilizer dealers and co-ops to hire qualified agronomists, for example. "The last manager we hired said he was willing to work for us because of the benefit, even though he could have received a higher salary elsewhere," the Mississippi farmer's wife and human resource manager tells me.

Down the road, employers who hand-pick which full-time employees get insurance and which don't face a fine so stiff, some CPAs equate it to a small business "death penalty." In fact, they believe it's just one more incentive for small business to drop company-provided benefits in the future.

Anti-discrimination rules are one of the least publicized features of the Affordable Care Act, in part because enforcement has been stuck in limbo for nearly four years. The rules barring employers from offering health benefits only to key employees or managers--or providing preferential treatment--were supposed to go into effect six months after the act's March 2010 passage, but IRS has postponed enforcement until it drafts regulations. So far, they're running behind schedule.

At the moment, "many small employers are offering health insurance to employees on a case-by-case basis, with the subsidy varying based on the employee’s longevity, value to the business, and perhaps their family demographics," says Andy Biebl, a CPA specializing in ag taxation and a principal with CliftonLarsonAllen LLP in Minneapolis.

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What may shock employers is the penalty for noncompliance: It’s $36,500 per discriminated employee per year. That's so huge, many small companies will simply opt to discontinue their group insurance plans altogether, Biebl believes.

The pending regulations will almost certainly forbid employers from offering insurance only to managers, an IRS official told the New York Times in a Jan. 19 report (see the Times article at http://nyti.ms/…).

Likewise, a company could not offer "highly compensated" individuals free coverage while other employees are required to pay, say 25% of the cost. One of the questions facing the IRS is whether an employer violates the law if it offers the same plan to all employees, but low-paid workers turn down the offer and instead obtain tax-subsidized coverage on the health insurance exchange.

Similar anti-discrimination rules already apply to Fortune 500 and other businesses that serve as their own insurers. The new law would extend guidelines to those who buy insurance direct from private carriers like WellPoint or local Blue Cross and Blue Shield plans.

For an in-depth analysis of an employer's health care options now, join CliftonLarsonAllen CPA Biebl Jan. 27 for an hour-long webinar, "Post-Obamacare: What's a Small Business Owner to Do Now?" Registration costs $45. For information, go to http://www.dtn.com/…

Follow me on Twitter@MarciaZTaylor.


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Bonnie Dukowitz
1/31/2014 | 9:14 AM CST
Did some read todays news? "Health Care Fallout" After again reading, I need to amend my earlier statement on agreement, Don. Obammacare is not an increment. Much more like a Rim, Ram and Rod Program. The test now is, can increments now fix the belly flop?
Bonnie Dukowitz
1/31/2014 | 5:52 AM CST
I agree, Don. If you read my statement. Overregulation and mandates did not generate the successes and are not the answer.
1/28/2014 | 7:01 PM CST
ACA/poor people; crop insurance/farmers Both outrageous
Don Thompson
1/28/2014 | 2:39 PM CST
Staying on the internet in the rural country can be a pain. Had to climb the holding bin this AM at -12 degrees to get the antenna on our "Rube Goldberg internets" lined up so I could say "Hey" to Bonnie. Regarding the health issue, lots of problems, real and imagined out there to be addressed. We live in a big country and it will require a big solution to fix and it can be done incrementally. ACA is the first increment and it will require fine tuning. I am not afraid of that. Government does have histories of great success and failures, just as humans and business have. We are the government so if you have serious problems with it, start fixing it with the guy looking at you from the mirror.
Bonnie Dukowitz
1/27/2014 | 4:53 PM CST
Have you considered, Don, the inefficiency's and expense you reference are the result of too many mandates and over protectionism already. Many acceptable treatments, which may be affordable in other countries are not approved in the USA. Also, If the medical profession tries and does not perform to an individuals satisfaction, the lawyers and court system has a hayday.
dick suwyn
1/27/2014 | 9:39 AM CST
I am all in favor of fixing some problems..such as preexisting conditions etc. But lets not "throw out the baby with the bathwater". To have Big Gov take over 1/6 of economy and the IRS now being the enforcer should give pause to anyone but those who live off taxpayers backs (except anyone who gets their payck from Government or do I say..Government is their payck). When you sum it all up...do you see a lot in Big Gov that makes you want to surrender more power /control to them? Lets hear which gov agencies you are so thrilled with you want them to take over your life?
Don Thompson
1/27/2014 | 8:20 AM CST
Right or privilege? What's the difference? In the USA today, healthcare distribution is a problem that needs a solution. Richest country in the world spends twice the money as any other comparable country, socialist or not, for much less effective results. Healthcare spending is the largest cause of personal bankruptcy and is the largest growing cost for the DODefense. Lack of a secure healthcare sources impact the upward mobility of our workforce daily. As you imply, I do not have a concern for you personally, but the impact of such an inefficient system costs me money and impacts my life daily. Therefore, I believe as have national leaders since George Washington that we need a national solution.
dick suwyn
1/27/2014 | 7:51 AM CST
I would add it is also a right not a privilege to have among other things (I dont think this is too much to ask for in America): 1. New Home w/ AC 2. Cable TV / Internet 3 New Cadillac in the garage 4. One "Free fill in the blank" of your hearts desire 5. Gov pay for min of 2 vacations every yr 6. Food! After all, greedy farmers should not make money off a basic need. This should be free for all! 7. Dental Insurance (including making teeth look movie star) that too is just basic human right 8. Base salary. I am sure the Gov has many studies and guidelines of how much money we need to live on. That amount should be direct deposited monthly into ones account. Dont make us beg, it is so humiliating. 9. Retirement account. Lots and lots of money to have no restraints on what / where I want to go. 10. Everyone should get free Obama phones and I would also include the latest lap top or pad. Make sure they never go "out of date" as that could significantly damage their self esteem to be seen w/not the latest and greatest. But what did Margaret Thacher mean when she said "The problem with spending other peoples money is that sooner or later you run out of other peoples money)? And I might add, the desire to make more. Makes you laugh when you realize how clueless she was...We just can print more once we taken away all the money from the "evil capitalist pigs". Once thing should be sooooooooooo obvious...socialism has worked out soooooo well everywhere and every time its been tried. Why hasn't the world switch to 100% communism already? Well the good thing, we are getting closer each day with our current Imperial President. Go Big Government! Or / but why do I have these words going thru my mind "a Government that is big enough to give you everything is also big enough to take everything". P.S. The closest around these parts that I have seen to Big Government Run City / Lifestyle would be Detroit. Fully run by Big Government Big Spenders Anti-Capitalist. Must be they just didnt spend enough money...next time they have to spend more and then Big Government will finally work. Ah but ya know, its just so much more fun spending everyone else's money ..all done with "good intentions" and so the results really dont mater. It's the thought that counts!
1/22/2014 | 1:52 PM CST
Just where does say healthcare is a right only in Obama world does anything like that show up.
1/21/2014 | 8:48 PM CST
This is America, not East Sudan. Health care is a right not a privilege.