I have an employer that is clearly a large employer ( 100+) who owns two other companies, one is also a large employer ( 80), the other has 47 employees . There are three different health plans in effect now. Does the 47 life employer have to comply with the employer mandate due to the parent companies size?
Employer Mandate
- Thread starter toddoxley
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I don't think so, not if its a separate company, i.e., separate corporation, even if owned by a parent company.
In fact, I'm assuming with all of the regulations on 50+ employee companies coming out (not just health care, but that is the elephant right now), you will see many companies split into 2 or 3 smaller companies to stay under 50 employees.
Dan
In fact, I'm assuming with all of the regulations on 50+ employee companies coming out (not just health care, but that is the elephant right now), you will see many companies split into 2 or 3 smaller companies to stay under 50 employees.
Dan
- 3,344
Djs I think this guy would have to comply as large employer because he has common ownership of all three companies...common ownership is the key....does anyone else love this chaos like me ?
If you read legaleze, following is a quote from page 221 of the new IRS regs on the Employer penalty:
2. Application of Aggregation Rules
For purposes of counting the number of full-time and full-time equivalent employees for determining whether an employer is an applicable large employer, section 4980H(c)(2)(C)(i) provides that all entities treated as a single employer under section 414(b), (c), (m), or (o) are treated as a single employer for purposes of section 4980H. Thus, all employees of a controlled group under section 414(b) or (c), or an affiliated service group under section 414(m), are taken into account in determining whether the members of the controlled group or affiliated service group together constitute an applicable large employer.
Section 4980H applies to all common law employers, including an employer that is a government entity (such as Federal, State, local or Indian tribal government entities) and an employer
that is an organization described in section 501(c) that is exempt from Federal income tax under section 501(a). The proposed regulations reserve on the application of the section 414(b), (c), (m), and (o) aggregation rules in section 4980H(c)(2)(C)(i) to government entities and churches, or a convention or association of churches (as defined in § 1.170A–9(b)). Until further guidance is issued, government entities, churches, and a convention or association of churches may rely on a reasonable, good faith interpretation of section 414(b), (c), (m), and (o) in determining whether a person or group of persons is an applicable large employer.
Several commenters asked for clarification of whether the aggregation rules used in determining applicable large employer status also applied for purposes of determining liability for, and the amount of, an assessable payment. The proposed regulations clarify that for a calendar year during which an employer is an applicable large employer, the section 4980H standards generally are applied separately to each person that is a member of the controlled group comprising the employer (with each such person referred to as an applicable large employer member) in determining liability for, and the amount of, any assessable payment. For example, if an applicable large employer is comprised of a parent corporation and 10 wholly owned subsidiary corporations, each of the 11 corporations, regardless of the number of employees, is an applicable large employer member. For a discussion of the related information reporting requirements for applicable large employer members under section 6056, see section VII of this preamble
http://www.gpo.gov/fdsys/pkg/FR-2013-01-02/pdf/2012-31269.pdfFor purposes of counting the number of full-time and full-time equivalent employees for determining whether an employer is an applicable large employer, section 4980H(c)(2)(C)(i) provides that all entities treated as a single employer under section 414(b), (c), (m), or (o) are treated as a single employer for purposes of section 4980H. Thus, all employees of a controlled group under section 414(b) or (c), or an affiliated service group under section 414(m), are taken into account in determining whether the members of the controlled group or affiliated service group together constitute an applicable large employer.
Section 4980H applies to all common law employers, including an employer that is a government entity (such as Federal, State, local or Indian tribal government entities) and an employer
that is an organization described in section 501(c) that is exempt from Federal income tax under section 501(a). The proposed regulations reserve on the application of the section 414(b), (c), (m), and (o) aggregation rules in section 4980H(c)(2)(C)(i) to government entities and churches, or a convention or association of churches (as defined in § 1.170A–9(b)). Until further guidance is issued, government entities, churches, and a convention or association of churches may rely on a reasonable, good faith interpretation of section 414(b), (c), (m), and (o) in determining whether a person or group of persons is an applicable large employer.
Several commenters asked for clarification of whether the aggregation rules used in determining applicable large employer status also applied for purposes of determining liability for, and the amount of, an assessable payment. The proposed regulations clarify that for a calendar year during which an employer is an applicable large employer, the section 4980H standards generally are applied separately to each person that is a member of the controlled group comprising the employer (with each such person referred to as an applicable large employer member) in determining liability for, and the amount of, any assessable payment. For example, if an applicable large employer is comprised of a parent corporation and 10 wholly owned subsidiary corporations, each of the 11 corporations, regardless of the number of employees, is an applicable large employer member. For a discussion of the related information reporting requirements for applicable large employer members under section 6056, see section VII of this preamble
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- 4,096
Yes,
If he falls under the rules of IRS code 414.
I currently have clients that are selling off partnership ventures so they do not qualify under the 414.
Right now a lot of business owners are selling off.
If he falls under the rules of IRS code 414.
I currently have clients that are selling off partnership ventures so they do not qualify under the 414.
Right now a lot of business owners are selling off.
414 is pretty easy to avoid though.
In general.... blah...blah ....blah, 80% ownership to be a parent subsidiary type of arrangement.
So, have at least 6 shareholders (avoid 50% controlling interest issues), and have someone own 21% of the stock that doesn't own any of the other companies stock.
Not ideal, but its a way around the pain.
My dad used to work for the IRS, back in the Reagan days. Under Reagan, the tax code was simplified (if there is such a thing) and revenues increased when that happened because companies gave up trying to get around a lot of these type of things. Yes, tax rates went down, but revenues went up at the same time. Imagine that.....
We are just going back to the times when companies and individuals will find it advantageous to do things that on the surface don't sound to smart, but it gets around various regulations.
And yes, I still expect a lot of mid-sized companies to break up to get around some of these rules. Won't work for all of them, but there will be several.
Dan
In general.... blah...blah ....blah, 80% ownership to be a parent subsidiary type of arrangement.
So, have at least 6 shareholders (avoid 50% controlling interest issues), and have someone own 21% of the stock that doesn't own any of the other companies stock.
Not ideal, but its a way around the pain.
My dad used to work for the IRS, back in the Reagan days. Under Reagan, the tax code was simplified (if there is such a thing) and revenues increased when that happened because companies gave up trying to get around a lot of these type of things. Yes, tax rates went down, but revenues went up at the same time. Imagine that.....
We are just going back to the times when companies and individuals will find it advantageous to do things that on the surface don't sound to smart, but it gets around various regulations.
And yes, I still expect a lot of mid-sized companies to break up to get around some of these rules. Won't work for all of them, but there will be several.
Dan
This can become a dangerous situation quickly. Ann is correct in her answer. DJS, you should be much more careful in your answers. The first answer was clearly irresponsible in so much as we dont' have all of the facts. It all has to do with how the ownership of the 47 lives has been constructed. What if the "parent" company only owned 10% of it? What if instead of "parent", it was a brother-sister, or what if...
As for your second comment, "414 is pretty easy to avoid", is a little careless too. This is clearly something a legal person should address.
As for your second comment, "414 is pretty easy to avoid", is a little careless too. This is clearly something a legal person should address.
You are correct, but, I guess my frustration with clear guidance is showing.
I should not have said 'easy to avoid'. I should have stuck with possible to avoid. On paper, its easy, in real life, its much harder.
Yes, it would take someone with full legal knowledge of this to sort out exactly how to structure it.
Also, since he used the term 'parent company', I should have assumed it was 80% owned. This is not always the case, but usually parent company is a term generally used with wholly owned subsidiaries.
Then there is the fact that I was researching family medical leave act and how it is implemented in CA, where there is a 75 mile rule thrown into the mix. Yes, it all starts to jumble together pretty quickly
I'll take my 'be more careful' to heart!
Dan
I should not have said 'easy to avoid'. I should have stuck with possible to avoid. On paper, its easy, in real life, its much harder.
Yes, it would take someone with full legal knowledge of this to sort out exactly how to structure it.
Also, since he used the term 'parent company', I should have assumed it was 80% owned. This is not always the case, but usually parent company is a term generally used with wholly owned subsidiaries.
Then there is the fact that I was researching family medical leave act and how it is implemented in CA, where there is a 75 mile rule thrown into the mix. Yes, it all starts to jumble together pretty quickly
I'll take my 'be more careful' to heart!
Dan
You are correct, but, I guess my frustration with clear guidance is showing.
I should not have said 'easy to avoid'. I should have stuck with possible to avoid. On paper, its easy, in real life, its much harder.
Yes, it would take someone with full legal knowledge of this to sort out exactly how to structure it.
Also, since he used the term 'parent company', I should have assumed it was 80% owned. This is not always the case, but usually parent company is a term generally used with wholly owned subsidiaries.
Then there is the fact that I was researching family medical leave act and how it is implemented in CA, where there is a 75 mile rule thrown into the mix. Yes, it all starts to jumble together pretty quickly
I'll take my 'be more careful' to heart!
Dan
Sorry if I came across harsh, it was not intended. But there are often times many comments made message boards that are incorrect or misleading. On this point there is little confusion, just lack of knowledge or awarness. By the way, parent company is also wrong. A parent company is a company that controls another company via stock ownership. It has nothing to do with 80%. Only if the parent company owns 100% can it have a "wholly owned subsidiary" relationship.
Harsh is okay. I was having an off morning.
Actually, 80% plays a big role though for determining parent subsidiary.
A parent-subsidiary controlled group exists when one or more chains of
corporations are connected through stock ownership with a common parent
corporation; and
−
80 percent of the stock of each corporation, (except the common parent)
is owned by one or more corporations in the group; and
−
Parent Corporation must own 80 percent of at least one other corporation.
- - - - - - - - - - - - - - - - - -
Oops, that didn't work correctly....
Now, I used the term wholly owned, simply because most companies that are 80% owned are usually wholly owned (100%) but not always. It's pretty clear they wanted to avoid someone having a 3% ownership avoiding 414.
My source of the quote is:
http://www.irs.gov/pub/irs-tege/epchd704.pdf
which is actually an interpretation of the 414 rules. I'm not an attorney, so you can re-interpret (without me disagreeing) all you want.
Dan
Actually, 80% plays a big role though for determining parent subsidiary.
A parent-subsidiary controlled group exists when one or more chains of
corporations are connected through stock ownership with a common parent
corporation; and
−
80 percent of the stock of each corporation, (except the common parent)
is owned by one or more corporations in the group; and
−
Parent Corporation must own 80 percent of at least one other corporation.
- - - - - - - - - - - - - - - - - -
Oops, that didn't work correctly....
Now, I used the term wholly owned, simply because most companies that are 80% owned are usually wholly owned (100%) but not always. It's pretty clear they wanted to avoid someone having a 3% ownership avoiding 414.
My source of the quote is:
http://www.irs.gov/pub/irs-tege/epchd704.pdf
which is actually an interpretation of the 414 rules. I'm not an attorney, so you can re-interpret (without me disagreeing) all you want.
Dan
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