2 Small Contractors-6 in Each Group what Could Go Wrong?

Jun 22, 2016

  1. yorkriver1
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    yorkriver1 Guru

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    Each of them has asked me to look into the possibility of group insurance.

    Then, they both tell me, only for certain employees, not for others. OK. Pay some a salary and others hourly. NO, we can't do that, sometimes to get a job done, we have to have as many hours as needed.

    So then, their only option, as I see it, is to pay less for each employee, or, if they are concerned with longevity, give the longest possible waiting period.

    I recall there is a type of provisional status that can be given for 90 days, then the clock would start for the typical 1st of month following 60 days after hire date.

    Any advice?
     
  2. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    Put the "others" on 1099... if possible. Other than that tell them its time to sit at the grown up table if they want to provide health insurance for employees.

    This sounds like the type of client that could take up much more time than they are worth.... just thinking out loud... lol.
     
    scagnt83, Jun 22, 2016
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  3. rcduggan
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    rcduggan Super Genius

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    Exactly why we have "Underwriting Requirements" and so employers can't discriminate. It is possible with some carriers allowing 1099 workers under a group plan.
     
    rcduggan, Jun 22, 2016
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  4. yorkriver1
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    yorkriver1 Guru

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    We have carrier and DOL, ER has the state and WC carrier wanting EE's properly classified, based on the EE definition, vs independent contractor. Those audits can be brutal.

    He can give raises, and that can be independent of discrimination rules if handled as reward for hard work, not as directed specific to insurance. He wants to cover premium for 4 of them, including himself, leave 2 off. The other owner wants self and office worker, leave 4 off, but still balked at salary for that person.
    Yes, also PIT... --make my case and let them decide. I hear DOL audits are more of a thing now, want to always keep recommendations in line.
     
    Last edited: Jun 23, 2016
  5. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    The DOL has hired thousands of new auditors over the past few years. It is happening more and more for all kinds of employee benefits.
     
    scagnt83, Jun 23, 2016
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  6. kgmom219
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    kgmom219 What's Next?

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    Run Away?

    The audit will be brutal and so will the E&O claim.

    1. Tell them No. They can't do this. Either they are going to cover everyone or not do it
    2. Do a dual choice plan with whoever is best in the area. Plan 1 is a bare bones, cheap plan. The company pays 50% of the EE cost on this plan. (So if its $300, company pays $150). On the second, better plan, company still pays $150. If the EEs want a better plan, THEY can pay the difference.
    3. Max waiting period is 1st of the month after 60 days.

    The problem is if he starts messing around "you will be FT for 75 days, but then you will be PT, so you don't get benefits", he is going to get reported by an employee. And you will get caught up in it.

    Other questions:

    1. Do these employees even want coverage? If they are subsidy eligible now, they are going to look at a group offering as a takeaway, not a benefit

    2. What's driving this request? Network? Cost? His wife is prego? Is there another option to fulfill whatever his needs are besides risking a DOL and DOI audit?
     
    kgmom219, Jun 23, 2016
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  7. TFMSINC
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    TFMSINC Expert

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    Write 'em individually.
     
    TFMSINC, Jun 23, 2016
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  8. Gulfman
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    Gulfman Guru

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    Not sure what's goin on here York.

    1. 2 small contractors with 6 per group (so 12 total).
    2. Excluded coverage for some?
    3. Hours / Salary ?
    ???
    • What exactly are you trying to write? (health,life,W/C?)
    • Do these guys want to form 1 Corp?
    • How long has the Corp been in Biz?
    • What's the downside risk to you (will this type of biz stay on the books?)

    Sounds complicated---what am i missing?

    .
     
    Gulfman, Jun 23, 2016
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  9. yorkriver1
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    Actually, it's 2 different prospects, same terrific idea from the owners to just cover who they want to cover. I am referring to both of them together because, same issue--ironic.
    Both owners are set up to pay themselves a salary, too--so incorporated, I assume--. They would be spending similar money for themselves, giving a benefit to key folks, but now getting a write off for the business. Obv not familiar with the rules. I can't see a way for them to do that, just looking for some options to suggest instead of violating DOL rules.

    They are looking to retain valued employees. Just rewarding the ones who he wants to reward by giving raises would simplify the situation. Not many employees may qualify for a tax credit but probably don't care that much about insurance. The folks who have individual insurance now would keep what they have.

    No WC, I just mentioned it because the suggestion of switching anyone to a 1099 who is a direct report to a supervisor would endanger them with the state tax collectors and their WC carrier. "What is an employee vs. independent contractor" definition. I have sold P&C to contractors, not currently, but that is an ongoing challenge in WC.

    I am planning to do a survey with all employees, at least for one of the employers, and if a couple do qualify for a tax credit, then doing individual plans may make more of them happy.

    I already have the owners both insured as clients on individual plans. I have one of the owner's manager, too. I am looking at what KG suggested, although it doesn't give the goodies to the HCE's that they want. One owner wanted to pay 100% of the premium for a couple guys, and probably himself. We know that's not OK. If he wants to give them a raise, that's going to be appreciated, too and not illegal as I understand it, unless he specifies they have to spend it for insurance.
     
    Last edited: Jun 23, 2016
  10. leevena
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    leevena Guru

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    What DOL rules are you concerned about violating...in paragraph one?
     
    leevena, Jun 24, 2016
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