New ACA Rule Excludes Veterans from ALE Counts

29 Sep

The Affordable Care Act’s (ACA’s) pay-or-play penalties apply only to so-called applicable large employers (ALEs). An ALE is an employer that employs, on average, at least 50 full-time equivalent employees (FTEs) in the prior calendar year. (For 2015 only, certain employers with between 50 and 99 FTEs on average in 2014 are exempt from pay-or-play penalties.)

Employers who are not interested in potentially incurring pay-or-play penalties under ACA but who are looking to expand their workforce beyond 50 FTEs should consider hiring a U.S. military veteran or his or her spouse.

In July, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (Transportation Act) which included an amendment to Internal Revenue Code (Code) Section 4980H, which sets forth the requirements of the ACA’s pay-or-play penalties and, importantly, establishes rules for counting employees to determinate ACA status. The Transportation Act amended the Code by adding Section 4980H(c)(2)(F), which excludes those covered by Tricare and Veterans Administration insurance from the FTE headcount for purposes of determining ALE status.

In other words, an employer that has been maintaining its workforce at just below 50 FTEs may now expand its workforce by hiring a veteran or his or her spouse covered by Tricare or VA insurance and still not be considered an ALE for the ACA’s pay or play requirements.

The legislation was passed into law at the end of July and most of D.C. takes a vacation for August, so the hope is that sometime soon the Internal Revenue Service will release guidance confirming for employers that they agree that the plain language of the amendment would exclude any spouse or dependent covered by Tricare or VA insurance, as well as the veteran him- or herself.

The new law is effective as of January 1, 2014, so employers who just went over 50 FTEs in 2014 should attempt to identify those current employees who might qualify for the exception, and should incorporate an identification process into their onboarding processes. The federal regulators may also provide guidance on how employers might go about asking current or prospective employees whether they fall into this exception. Clearly, there is nothing wrong with asking an individual if he or she is a veteran (and giving thanks for his/her service). Care should be taken, however, in asking about Tricare or VA coverage. Without proper guidance, employers will want to avoid appearing to suggest or recommend that a current or prospective employee opt into VA or Tricare coverage instead of the employer’s insurance.

This new exclusion may provide a significant incentive to hire veterans and their families while providing relief to many small and mid-sized employers who have been “making do” with their current workforce size to avoid being subject to pay-or-play. A rare occasion in which our representatives in Congress fashioned a true win-win.


Leave a Reply

Your email address will not be published. Required fields are marked *

Successful outcomes, one engagement at a time.

  • I have extensive experience in working with benefits advisors and can unequivocally say Presidio is excellent!  Alan and his team have done a great job for Ikanos.  They are effective at both the strategic and tactical levels.  As advisors, they are knowledgeable on trends  and proactively engage in a process so we can  plan future steps.  They have done a good job for us in the traditional benefits broker roles of  negotiating rates and changing carriers when necessary.  In addition to the higher  level and strategic functions, they are an extra pair of hands to our lean benefits department in helping us and our employees navigate when  issues, such as claim administration,  arise with a  particular carrier.  We have had a great five year plus relationship with Presidio!

    - Jim Murphy, Vice President, Worldwide Human Resources, Ikanos
  • I have worked with Presidio for several years.  I have found them to be professional in all our dealings.  Our company has had several changes to go through due to our size, structure, and new ACA rulings.  Presidio is very knowledgeable and has given us suggestions/options to make our changes and transitions much smoother and with no disruption to the company or our employees.  They are always proactive with our renewals, negotiating lower increases with our providers.  This makes my job less stressful and I am very appreciative of all the support they provide our company.

    - Teresa Barnhart, Director of Administrative Services, NagraStar
  • Presidio Benefits Group has always, and continues to, exceed our expectations for client support, while being strategic, yet practical – a true and trusted partner when tackling the many challenges of offering a comprehensive, competitive, compliant, yet cost-effective, employee benefits package. They are a true extension of our HR department, proactively helping us navigate the ever-changing landscape of employee benefit and wellness programs.

    - Cori Ekman, Vice President, Human Resources, Nagra Kudelski
  • Matt Coan and his team have provided us with outstanding client service. They have a great understanding of our needs and exhibit pro-active leadership in dealing with carriers, our employees’ claims issues and the increasingly difficult areas of compliance.  This is our first year in a self insured “captive” and they have been our partner throughout the process.  There are many insurance brokers offering a variety of services, but there only a few that are true professionals like the team at Presidio Benefits Group.  They don’t just show up once a year at renewal time, but are professionals that support our needs throughout the plan year.

    - Cheryl Rankin, Director of Human Resources, DGA
  • Presidio makes the complicated world of benefits easy. This is important because the benefits we offer our staff are such a critical part of retaining outstanding talent, and the landscape is always changing. I can count on Presidio to provide me with accurate and timely information with warmth and expertise.

    - Gregg Solimine, Human Resources & Administration Manager, The Women's Foundation of California
  • We have been working with PBG since 2009, they really have been great partners helping us navigate the ever-changing healthcare landscape.  We genuinely try to offer the best benefits program we can to our employees and their families, PBG gets this and works with us to achieve that.

    - Carolynn Smith, Associate, Forell/Elsesser
  • We have worked with Presidio Benefits Group for over 10 years, we are solicited by brokers all year round for our business, I wouldn’t trust our employees’ benefits to anyone but the Presidio Benefits Group. They are always very quick to respond to our needs and they always go above and beyond to solve individual employee needs and resolve any carrier issues we might have! Alan Ikeya and his team are the very best at what they do!

    - Cheryl Maclennan, Human Resources/Sales & Marketing, Pool Covers, Inc.
  • We have been partnering with the Presidio Benefits Group for over three years and our experience with them has been outstanding.  Presidio is such a strategic partner as they really think outside the box to ensure we have a comprehensive and competitive benefits package which has contributed to our ability to attract and retain highly talented staff.  Not only is the Presidio’s top-notch team very ethical, personable and professional, they have an in depth knowledge of the benefits landscape and proactively support us in the areas of compliance, mitigating increasing healthcare costs, implementing best practices and navigating the complexities of benefits laws (e.g. ACA).  Hands down, Presidio is the best benefits broker around.

    - Christa Brothers, Vice President, Human Resources, Earthjustice
  • When I joined Gild, I knew it was time to reassess the effectiveness of our Professional Employer Organization (PEO) relationship. Presidio helped me build a strategy to move benefits in-house and less than two months after our initial meeting, Gild had a comprehensive benefits program up and running. I couldn’t have done it without the Presidio team. Their level of care and attention to me and my employees makes them a true partner.

    - Brittany Brown Ceres, VP of Employee Success , Gild, Inc.
learn more about our advantage

Experts at a single click