Contract workers and the ACA

As employers prepare for the changes mandated by the Affordable Care Act, there are several key factors to keep in mind to avoid incurring major penalties.

One of the most controversial legislation pieces concerns part-time workers. Under the ACA, employers with 50 or more staff members must extend healthcare benefits to all employees who work at least 30 hours per week. Many state and local governments and school districts are grappling with how to afford the requirement, and are considering the options of limiting employee hours, paying the penalty or reassigning employees as contract workers.

David Smythe, chair of the School of Business at the University of Phoenix Colorado campus, recently told seminar attendees contract workers are not included in full-time equivalent equations that determine whether employers are large enough to have to extend coverage, according to The Gazette.

However, changing employees into contract workers could be considered fraudulent, stated Michael Newman, an attorney and contributor for Supra Law News. The IRS is very familiar with the trend of employers misclassifying workers for tax purposes and federal regulators are likely aware many entities may seek this resort to avoid ACA-related costs.