Under legislation signed into law last week (H.R. 3236), veterans with coverage under Tricare, CHAMPVA, and other qualifying government medical coverage programs will not count against employers in determining if they employ enough employees to be considered an “applicable large employer” who is subject to the Affordable Care Act (ACA) employer mandate. This law is retroactively effective for months beginning on or after January 1, 2014. If you are a company employing, or interested in employing, veterans, you should be familiar with these changes.
It should be noted that this new exclusion only applies to purposes of determining your status as an ALE. These employees must still be counted in determining the full-time employees to whom an ALE must offer affordable, minimum value medical coverage.
New Veterans Exception. The ACA employer mandates applies to your company if you employed at least 50 FTEs on average during each month of the prior calendar year (this threshold increased to 100 FTEs for certain qualifying employers, but only for 2015). All full-time and part-time employees of entities that are part of your controlled group or affiliated service group are included in your ALE calculation. You may be permitted to exclude seasonal workers, but only if certain requirements are met.
Under the new law, when determining whether you employ enough full-time equivalent employees (FTEs) to be an "applicable large employer" (ALE) under the ACA, employees who have medical coverage (1) under a program for members and certain former members of the armed forces and the Commissioned Corps of the National Oceanic and Atmospheric Administration and of the Public Health Service, including coverage under the Tricare program or (2) under certain programs administered by the U.S. Department of Veterans Affairs (“Covered Vets”) are now disregarded.
Impact on Employers. So what does this mean for you?
- Identify Covered Vets. The new rule’s January 1, 2014 effective date means that if your FTE totals were or are teetering near the 50 or 100 FTE thresholds last year or this year, you may have gotten a reprieve. You should take steps to identify your employees in the excluded categories to ensure that they are excluded from your ALE threshold calculation.
- Note: It is not yet clear how employers should identify their Covered Vets. For prospective employees, should you include a question in application materials or new hire packets asking if the employee is a Covered Vet? For current employees, should you circulate a questionnaire or include a question in open enrollment materials asking if the employee is a Covered Vet? While it appears clear that you should be able to ask prospective employees about their veteran status, asking employees or prospects about their healthcare coverage may raise issues under the ACA's anti-abuse rules. Therefore, you should seek advice of legal counsel and proceed with caution when identifying Covered Vets.
- Exclude from ALE Calculation. Starting with the 2014 calendar year (which is used to determine ALE status for 2015), you should exclude Covered Vets in calculating your ALE threshold. Even if an employee was a Covered Vet for only part of the calendar year, excluding this employee will still help reduce your overall employee count.
- Note: If you are teetering on the brink of ALE status, you may find a new incentive to hire Covered Vets since such hires would not increase your risk of becoming an ALE. However, to avoid any discrimination issues, you should make sure that decisions to hire or fire are clearly not based on whether or not the employee or prospect qualifies as a Covered Vet.
This new exclusion should not only provide significant relief to many small and mid-sized government contractors who were already struggling with the overlap of their compliance obligations under the Service Contract Act and the ACA, but also to many non-government contractors who have chosen to hire a significant percentage of veteran employees.