There is no doubt that every private club leader in the country gave a sigh of relief when the president delayed the “Employer Mandate” provision found in the health care law. The news was certainly a victory for NCA and our allies on the Small Business Coalition for Affordable Healthcare, and it gives us hope as we continue to work to lessen the impact of the Affordable Care Act (ACA).
However, one truth remains: The Employer Mandate may be delayed until 2015, but it has not been repealed. Our industry must use these extra 12 months to truly understand the impact of the Employer Mandate and prepare for its implementation.
What Does the Delay Mean?
The Employer Mandate requires clubs with 50 or more full-time and full-time equivalent employees to offer health insurance to employees who work 30 or more hours per week. If a club fails to do this, then it will be fined $2,000 per employee (minus the first 30 employees). If a club offers health insurance but the plan is deemed “unaffordable,” or does not meet government requirements, then the club will be fined $3,000 for each employee who goes to the Exchange and receives a subsidy to purchase health insurance.
The Employer Mandate was to begin either on January 1, 2014 or the first day of a club’s 2014 insurance renewal date, whichever came later. For example, if a club’s plan runs from October 1, 2013 to September 30, 2014, it would be subject to the Employer Mandate beginning October 1, 2014. However, under the announced delay, the Internal Revenue Service (IRS), which enforces this provision of the law, will not fine clubs for failing to comply with the Employer Mandate until 2015.
What does this delay mean for a club that currently offers insurance?
1. The club will not be fined for failing to offer insurance to employees working 30 or more hours per week from now until the first day of its 2015 plan year.
2. The club will not be fined for offering “unaffordable” insurance to employees from now until the first day of its 2015 plan year.
3. The club will not be fined for offering insurance that fails to meet the government requirements from now until the first day of its 2015 plan year.
What does this delay mean for a club that currently does not offer insurance?
1. The club will not be fined for failing to offer health insurance to employees working 30 or more hours per week from now until January 1, 2015. Finally, this delay also pushes back the requirement for clubs to file an “information return” with the IRS and with their employees. This new filing was to provide specific information regarding the kind of insurance clubs offered in 2014. The first such filing was to be made in 2015. Now, these filings will be based on information gathered in 2015 and filed in 2016.
What Should Clubs Be Doing?
The biggest problem with the Employer Mandate is that it requires clubs to offer health insurance to more employees than they have in the past. In most private clubs, employees working anywhere from 35–40 hours per week have been offered health insurance through the club. On the other hand, those working “part-time,” traditionally considered 35 hours per week or less, have not been offered this benefit. In 2015, that will have to change.
Not only will clubs be required to offer insurance to more employees, but they will also be paying more in employer contributions for insurance. Even if a club lowers its employer contribution percentage, there will still likely be more dollars spent because of the additional employees covered.
Consequently, the Employer Mandate now demands a critical review of the hours employees work. No longer will managers simply have to worry about an employee exceeding the 40-hour threshold requiring overtime pay. Beginning in 2015, managers will have to worry about an employee working more than 30 hours requiring health insurance coverage. The Employer Mandate could even necessitate the hiring of additional staff to work the hours that current staff cannot to ensure part-time employees stay under that 30-hour threshold.
Unfortunately, the costs of complying with the Employer Mandate could soar and require clubs to perform a complicated balancing act. Club managers will need time to determine how to effectively allocate employee hours to meet their members’ needs while meeting the new requirements under the health care law—all without jeopardizing the club’s financial footing.
During the next 12 months, NCA recommends clubs undertake the following steps to prepare for the Employer Mandate:
1. Club leaders should begin tracking the hours of their employees to determine who works 30 hours per week or more, whether that should change, and who will require insurance coverage by law in 2015.
2. Club leaders should begin discussions with their finance committees and boards about the increased costs that will materialize from providing the employer contribution for insurance to newly eligible 30-plus hour employees in 2015.
3. Club leaders should also speak with their insurance brokers about the potential increase to their overall insurance premium based on the mandatory benefits that must be included in any policy sold under ACA. Club managers that effectively prepare over the next 12 months will have the necessary information to make informed decisions about the Employer Mandate and its impact on their club’s bottom line. Without this information, club leaders may be left with little time to make hard decisions when 2015 arrives.
How hard will these decisions be? News reports have documented how state governments, major colleges and universities, large manufacturers, small retailers and restaurants have already planned to lower costs by capping staff hours at 29, by stopping contributions for spousal coverage, or by dropping health insurance coverage all together. Private clubs are no different, and should start now to prepare staff and members for the changes that may soon be implemented.
While club leaders review employee hours and calculate higher costs, they should also focus on the host of new taxes being levied against their club members. Under ACA, most private club members will see a new 3.8 percent tax on investment income and a new 0.9 percent payroll tax. Additionally, under the recently passed American Taxpayer Relief Act (ATRA), those same club members will likely see a nearly 5 percent hike in their income tax rate, a 5 percent jump in their capital gains tax rate, and a significant cut to their itemized deductions and personal exemptions.
NCA Resources for Clubs
While the delay of the Employer Mandate by the administration was positive for the private club industry, it is still on the books and will begin as scheduled in 2015. The Employer Mandate may be seen as a significant threat to private clubs today. Clubs that fail to find ways to mitigate its impact will struggle in the months ahead. NCA and our partners will continue to push for a complete repeal of the Employer Mandate. Now is the time to prepare your employees for the realities of ACA.
This law fundamentally changes the way clubs interact with their staff and their members. The quicker you educate your staff and your board, the better off your club will be.
As always, NCA is here to help guide you through the complexities of the law. We’re supporting our member clubs across the country by providing a comprehensive online Health Care Resource Center, Health Care Town Hall meetings, health care seminars, webinars and finally, presentations. We are ready to assist you and your board as you navigate the law.
Most importantly, by beginning today your club will be far more prepared to deal with the law and its impact when it finally arrives.