Affordable Care Act

Who can afford to pay penalties of $100 per day per employee? No one.

That is what noncompliance with the Affordable Care Act, "Obamacare," could cost your company or nonprofit organization. You are thinking that you are not a large employer, right? You might need to rethink that.

When determining whether your company, or nonprofit organization, is an applicable large employer, "ALE," under Obamacare, you may need to take into consideration who owns the company, or controls the organization. If you happen have an ownership interest in more than one company, or are involved in more than one nonprofit organization, you may need to be aware of a little thing called Employer Aggregation Rules.

Companies with common ownership may find themselves part of an ALE group. In these situations, the number of full-time and full-time equivalent employees for each member of the group is totaled to determine if Obamacare applies to each individual member.

What am I talking about? Here is an example:

Company A – solely owned corporation with 25 full-time employees (averaging 30 hours per week or more)

Company B – second business owned by the same person as Company A with 35 full-time employees and 6 full-time equivalent employees

Individually, neither Company A nor Company B would fall under Obamacare, BUT, because they are under common ownership, both companies will fall prey to Obamacare mandates. There are a total of 66 full-time and full-time equivalent employees in this case.

This could also happen where Company A or B owns the other company. It could also happen if there are trusts, estates, partnerships, etc. involved.

That is common ownership. But, no one OWNS a nonprofit organization, right? Right, but, there is something called common control, and it adheres to the same basic philosophy.

Let’s talk about Organization C and Organization D.

We already established that no one owns these organizations, but there are individuals that determine how the organization is to be run…the Board of Directors. If the Board of Directors for Organization C and Organization D are comprised of substantially the same individuals, guess what? You got it; the organizations are under what is called common control, which could subject them both to Obamacare if the total full-time employees for both companies exceeds the threshold, even if neither organization would be subject to Obamacare separately.

It’s not enough to evaluate just the Board of Directors. You must also look at the trustees, agents, and employees of the organizations. According to Reg Section 1.414(c)-5, "…A trustee or director is treated as a representative of another exempt organization if he or she is also a trustee, director, agent, or employee of the other exempt organization."

So how do you know if you are actually part of a controlled group? Well, that isn’t easy to answer. Typically, the magic number is 80%. If an individual, or group of individuals, owns at least 80% of two or more companies, the companies would be considered part of a controlled group.

The same thing applies to two or more nonprofit organizations. If you have the substantially the same directors, trustees, employees, or agents in each organization, the organizations may be considered to be under common control.

If that isn’t complicated enough, beware of indirect ownership. But, we will leave that for another day.

If you think your companies or organizations may fall under common ownership, or common control, I recommend talking to your attorney and accountant to make sure you are in compliance with the Obamacare mandates. After all, no one wants to pay $36,500.00 per full-time employee per year for not being aware of the rules.