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ACA Subsidies Case Heard

Earlier this month, the U.S. Supreme Court decided to hear King v. Burwell, a case involving a challenge to the IRS’s interpretation of insurance subsidies under the Affordable Care Act. The issue is whether subsidies are available to those in states that have not created an insurance exchange. The IRS took the position that subsidies are available through either state or federal exchanges. If the Supreme Court strikes down the IRS’s interpretation, arguably, individuals and employers in states without an exchange will not be subject to the ACA’s mandate. However, employers and individuals in states that have an exchange (like CA and NY) will still be subject to the ACA’s mandate.

The fact that the Supreme Court decided to hear the King case came as a surprise as it generally does not do so unless the Courts of Appeals have issued conflicting decisions. The D.C. Circuit has agreed to re-hear a case raising the same question, so there is not currently a clear split. The case will be heard before the end of the Supreme Court’s term in June 2015. The effect of its decision on the ACA will not be clear until the Court has made its ruling.

Below is a depiction of some of the states that have made their own exchanges. More information about the ACA can be found on Media Service’s website.

Map of U.S. Exchanges ACA

The ACA, Independent Contractors and You

As we all know by now, under the Affordable Care Act (ACA) employer mandate, an applicable large employer that does not offer affordable minimum value group health coverage to its full-time employees (and their children up to age 26) may be subject to employer-shared responsibility penalties under Internal Revenue Code §4980H. Whether an employer is an “applicable large employer” depends upon its number of full-time (and full-time equivalent) employees.

Due to these provisions, the use of independent contractors can become an even stickier wicket than before. Some production companies classify workers as “independent contractors,” “consultants,” “contingent workers,” “freelancers,” or other similar terms. These would include those workers working through a “loan-out” company (Corporations, LLCs, etc.).

Employees (those receiving W-2s) are subject to wage and hour requirements, federal and state income tax withholding, FICA withholding, employment taxes, and, most recently, the ACA employer mandate. There are no such costs for independent contractors, such as those working through loan-outs, as the loan-out is the employer of the worker, not the production company.

It is important for employers to understand the differences between an employee and an independent contractor, especially in today’s ACA climate. In addition to potential ACA penalties, significant tax consequences result if a worker is misclassified as an independent contractor and is subsequently reclassified as an employee, including: liability for withholding taxes, interest and penalties, and the potential disqualification of employee benefit plans. Insurance coverage can be offered to those workers working through a loan-out, and ACA penalties may be avoided; however, as mentioned above, employers may still be subject to other tax consequences should the IRS determine the worker was misclassified.

It’s important for every employer to review the common-law employee rules, makes sure it has properly identified all of its common law employees as employees. More information is available on the IRS website here.

Media Services’ ACA Benefits Eligibility reports for the purposes of tracking hours has mechanisms built in to include or exclude loan-outs, based on the production company’s preference. Additionally, our insurance plans allow the participation for those workers working through loan-outs to enroll in their chosen plan.

Learn more about our ACA-compliant health plans with the lowest premiums in the industry.

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