Minding Ag's Business

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.

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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