WEDNESDAY, FEBRUARY 6, 2013
'War' is declared as city plans luxury development in the middle of public housing
Here we go
The Daily News reports today that the cash-strapped New York City Housing Authority (NYCHA) is planning on leasing playground and community center space for luxury high-rises
Per the article:
[T]he agency plans to lease out land to private developers who will then build some 3 million square feet of luxury apartments smack in the middle of Manhattan housing projects.
Internal documents obtained by the Daily News show the planned 4,330 apartments in eight developments are all in hot real estate neighborhoods, including the upper East and West Sides, the lower East Side and lower Manhattan.
Of the new units, 20 percent will be set aside as “affordable” — designated for families with net income of $50,000 or less.
But will the richies want to live so close to the poors? Not to worry! Per the article: “The new luxury towers will face away from the old, deteroriating affordable housing.”
As the Daily News put it: “The housing authority is planning its very own Tale of Two Cities.”
On the Lower East Side, a parking lot at the Baruch Houses will be redeveloped into luxury towers. There are also plans to lease a parking garage at Campos Plaza on Avenue C.
Meanwhile, residents are mobilizing against the plan. The Lo-Down has details from last night's CB3 Land Use Committee meeting, where Smith Houses Tenant President Aixa Torres warned: “This is a travesty,” she said. “We are not going to take this… When no one wanted to live here, we stayed… if you want a war, you got a war.”
The upside for the NYCHA: They expect to generate $31 million to $46 million in annual lease payments, “all of which will go toward fixing up deteriorating buildings. The agency currently has a backlog of 420,000 repair orders and faces a $60 million budget gap annually,” the Daily News reported.
Grieve at 10:47 AM
Shawn G. ChittleFebruary 6, 2013 at 11:14 AM
In the grand history of bad ideas in New York City, this may just top the Robert Moses plan to put a highway through the Village.
The NYCHA has officially lost its mind. Lost. It.
Sh!t My Tenants SayFebruary 6, 2013 at 11:23 AM
You mean NOT segregate playgrounds? Yea, the kids can play in city parks with other city kids! As for the parking, lol. This is what happens on a highly populated geographically constrained island with artificial restrictions on building rights and a huge chunk of the housing stock unavailable due to another artificial program, Rent Stabilization…. We are left with no other choice than to take away parking spots of housing projects. See what you have done pro-RS People? Where will they park those BMWs?
Robin MilimFebruary 6, 2013 at 11:29 AM
What are they smoking? I've never heard anything so ridiculous. We need MORE affordable housing so badly, if they can find more space to build…THIS is what they came up with??!! Sickening
AnonymousFebruary 6, 2013 at 11:44 AM
why should affordable housing be smack dab in close proximity to the central business district. I'm all for affordable housing but it should not supplant local housing for people whose taxes subsidize the affordable housing. Were I a recipient of subsidized housing, I'd stay happy about that and keep my trap shut.
AnonymousFebruary 6, 2013 at 12:02 PM
The seeds that Koch sowed have come to fruition.
Bloomberg is giddy like a teenage girl oh her date about this.
AnonymousFebruary 6, 2013 at 12:17 PM
sorry to be a realist
but the fact is the EV is lined with waterfront projects..
this land is super valuable
at some point in the next 25 years these project will be history
CASFebruary 6, 2013 at 12:20 PM
I'd like to see the math they used, because these two statements seem inconsistent…
“NYCHA expects to pocket $31 million to $46 million in annual lease payments”
“Developers will get a sweet deal: a 99-year lease with the lease payments to the authority frozen for the first 35 years”
Sounds like they won't pay anything for the first THIRTY-FIVE YEARS of the deal, so NYCHA won't get that additional operating revenue to fill the budget gap until 2048ish?
Will the lease payment amounts be tied to inflation? $40 million in today's dollars is a lot different than $40 million in 2050 dollars.
Por ejemplo, $40 in 1976 would have been equivalent to $156 in 2011. I don't think $40M is going to buy much in 2050.
So the argument that these lease payments are going to be used to improve the quality of the facilities seems unlikely. Maybe once those payments start (in 2048) they might be applied that way, but by that time the annual budget gaps will be significantly larger (4x if you use historic inflation rates as a guide), so those lease payments won't be making much of a dent.
Sorry to be an econ nerd, but the math doesn't make sense to me. Sounds more like smoke and mirrors to distract people from what is probably the first step in displacing altogether the residents from that housing.
AnonymousFebruary 6, 2013 at 12:22 PM
So, will the kids' play areas in the new luxury high rises face the water so they don't have to stare at the project kids?
AnonymousFebruary 6, 2013 at 12:36 PM
Great idea. Parking lots can't generate the income needed to fix up the NYHA buildings but rents from market-rate tennants can. And this looks to be adding to the stock of affordable housing, not taking away from it.
shmnycFebruary 6, 2013 at 12:50 PM
This move was inevitable, but it is not a fait accompli.
This is the sort of effort worthy of organizing around, but I'd guess a lot of people who oppose 7-Eleven will support this.
blue glassFebruary 6, 2013 at 1:01 PM
anonymous 11:44 affordable housing should not supplant local housing for people whose taxes subsidize the affordable housing. Were I a recipient of subsidized housing, I'd stay happy about that and keep my trap shut.
would you also keep your mouth shut about your taxes going for subsidies for developers of luxury housing?
and do you think everyone that is against this is a low class user of your taxes? or just low class?
shmnycFebruary 6, 2013 at 1:02 PM
Anonymous at 11:29 AM,
Affordable housing is always built in marginal areas. It just so happens that these marginal areas eventually become valuable, and the poor are shuffled somewhere else.
Just this morning I was re-reading David Harvey's “The Right to the City”. http://newleftreview.org/II/53/david-harvey-the-right-to-the-city He describes the same forces at work around the world: the slums of Mumbai, the favelas of Rio de Janeiro, and
“In New York City, for example, the billionaire mayor, Michael Bloomberg, is reshaping the city along lines favourable to developers, Wall Street and transnational capitalist-class elements, and promoting the city as an optimal location for high-value businesses and a fantastic destination for tourists. He is, in effect, turning Manhattan into one vast gated community for the rich.”
I wouldn't put responsibility squarely on his shoulders, as this is a global phenomenon, but he's certainly doing his part to move things along.
AnonymousFebruary 6, 2013 at 1:24 PM
How many Chinese “low income” people live in Baruch houses, work under the table in Chinatown or in the garment district, and live off subsidized housing and god knows how many other state and federal programs?
AnonymousFebruary 6, 2013 at 1:28 PM
The housing groups in the area such as GOLES and The Cooper Square Committee have already sold us down the river with the SPURA compromise. They are weak and submissive. Don't expect a fight for NYCHA from them. Don't expext anything other than submission from Rosie Mendez, Margaret Chin and Margarita Lopez. Don't expect much from the conservative housing lawyers on CB3 either.
ABCRealFebruary 6, 2013 at 2:12 PM
Not for nothing. But how can people living off the public subsidizing their housing needs…in Manhattan, of all places…have the audacity to try and dictate what NYCHA does with their land in order to make their finances work? If they don't like living next to luxury towers and all the good that will bring to their neighborhoods in terms of increased services and political power, they can move to a slum somewhere else in the city. It's truly unbelievable what people will whine about. Here COMES the neighborhood LES.
Crazy EddieFebruary 6, 2013 at 2:16 PM
I guess none of these Bloomberg A-holes saw “Dead End” (1937). Sigh.
Ken from Ken's KitchenFebruary 6, 2013 at 2:46 PM
NYCHA and the Mayor of Luxury City can paint this as a pragmatic attempt to shore up NYCHA's financial woes, but residents of the targeted neighborhoods can read the writing on the wall. First the market rate towers get built. Then just like day follows night, residents of said market rate towers will at some point in the not too distant future begin complaining to elected officials about the public housing projects next door.
Chin's making pathetic yapping noises about not enough affordable housing in the market rate towers, suggesting to me that this is already a done deal, like the dog and pony show that was put on for new Yankee Stadium deal. Nevertheless, I hope that there's a knock down drag out fight over this.
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Roadmap to Compliance: Navigating the Employer Shared Responsibility Rules
byErik Vogt, Leigh Riley |Foley & Lardner LLP Contact
Earlier this month, the IRS issued proposed regulations that provide much-needed guidance on the new “pay or play” rules (also called the shared responsibility rules) that will apply to employers’ group health plans beginning 2014 under the Patient Protection and Affordable Care Act of 2010.
Beginning in 2014, certain employers may be subject to an excise tax if any full-time employee is eligible for a premium tax credit or cost-sharing reduction with respect to his or her purchase of coverage on the new health insurance exchanges and either (i) the employer fails to offer minimum essential coverage to its employees (and the employee’s dependents), or (ii) the employer offers minimum essential coverage to its employees (and the employee’s dependents) but such coverage is unaffordable or does not meet the minimum value requirements.
The proposed regulations are complex and detailed. This article is intended to provide a high-level overview of the requirements set forth in the proposed regulations and is not intended to be a comprehensive summary. For example, a number of special rules apply to educational organizations that are not discussed in this article.
For more detailed information, please contact your regular Foley employee benefits attorney or one of the authors of this Legal News Alert. Foley also will host a live Web conference to discuss these rules on Tuesday, February 26, 2013. Registration for this complimentary Web conference is available here.
I. When are the new rules effective?
The new rules become effective on January 1, 2014. If, however, an employer who is subject to the new rules maintains its group health plan on a non-calendar plan year basis (and has done so since December 27, 2012), then the employer will not be subject to an excise tax until the first day of the plan year that begins on or after January 1, 2014.
Even though the law’s provisions are not effective until 2014, employers will need to take certain administrative actions during 2013 in order to be ready for the law when it becomes effective.
II. Is my company subject to the employer shared responsibility rules? (Determination of “applicable large employer” status)
The employer shared responsibility rules apply to “applicable large employers.” An employer is considered an applicable large employer for a calendar year if it employed an average of at least 50 full-time employees (taking into account full-time equivalents (FTEs)) on business days during the preceding calendar year. Accordingly, an employer who employed 50 or more full-time employees and FTEs during 2013 will be subject to the new rules in 2014.
For many employers, this determination is a no-brainer. But an employer that is on the cusp should undertake a five-step process to determine whether it is an applicable large employer subject to the shared responsibility rules.
Step 1: Determine Employer.
The term “employer” means the person who is the employer of an employee under the common-law standard. The determination as to whether an employer is an applicable large employer is made on a controlled group basis. This means that all entities treated as a single employer under Code Section 414(b), (c), (m), or (o) are treated as a single employer. Under these rules, entities are generally considered part of a controlled group if at least 80 percent of their interests are held by common owner or if one entity performs management services for another entity. These controlled group rules are very complex and fact-specific. An employer should consult with qualified ERISA counsel if there are any questions. The proposed regulations also provide that an employer includes predecessor and successor employers but does not define these terms (further guidance on this topic is anticipated).
Step 2: Identify Common Law Employees.
The proposed regulations use the common law standard for determining whether an individual is an employee. Under this standard, an employment relationship generally exists when the person for whom the services are performed has right to control and direct the individual who performs the services, not only as to the result to be accomplished but also as to the details and means by which that result is accomplished. For this purpose, leased employees, sole proprietors, partners in a partnership, and two percent S-corporation shareholders are not considered employees. Employers should ensure that individuals who are treated as independent contractors are properly characterized as such. An employer with 49 full-time employees and three full-time independent contractors, for example, could be subject to the law if the IRS later recharacterizes the independent contractors as common-law employees.
Step 3: Calculate Hours of Service.
Step 3.1: Determine method that will be used to calculate hours of service for hourly and non-hourly employees.
Hourly Employees: Employer must calculate actual hours of service.
Non-Hourly Employees: Employers may count hours of service under one of these three methods:
Counting actual hours of service
Crediting an employee with eight hours of service for each day for which the employee would be required to be credited with one hour of service (days-worked equivalency method)
Crediting an employee with 40 hours of service for each week for which the employee would be required to be credited with at least one hour of service (weeks-worked equivalency method)
An employer may change its method of crediting hours of service for non-hourly employees on an annual basis and may apply different methods for counting hours of service to different classifications of non-hourly employees, so long as the classifications are reasonable and consistently applied. However, the proposed regulations contain an anti-abuse rule that prohibits the use of an equivalency method that would substantially understate the employee’s hours of service (for example, applying the days worked equivalency method to an employee who works three 10-hour days per week is not allowed).
Step 3.2: Calculate Hours of Service.
The proposed regulations provide that an employee’s hours of service include:
Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer
Each hour for which the employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence
Please note, however, that hours of service do not include hours of service to the extent the compensation constitutes foreign service income.
Step 4: Calculating Full-Time Employees and FTEs.
In order to determine whether an employer is an applicable large employer, the employer must count the number of full-time employees and FTEs in each calendar month.
Step 4.1: Identify Full-Time Employees.
For each calendar month, identify each employee who averaged at least 30 hours of service per week in that month (or alternatively, 130 hours in that month). This is the number of full-time employees.
Step 4.2: Count FTEs.
All other employees are considered for purposes of determining the number of FTEs employed during the preceding calendar year. This is done by calculating the aggregate number of hours of service (not to exceed 120 hours of service per employee) for the non-full-time employees for each month, and dividing the total aggregate hours of service by 120. The result is the number of FTEs employed for the calendar month.
Step 5: Determine Applicable Large Employer Status.
An employer’s status as an applicable large employer for a calendar year is determined by taking the sum of the total number of full-time employees and FTEs for each calendar month in the preceding calendar year and dividing by 12 (the result is rounded down to the next whole number). Please note, however, that under a special transition rule applicable for this first year only, an employer may determine its status as an applicable large employer by reference to a period of at least six consecutive calendar months, as chosen by the employer, in the 2013 calendar year (rather than the entire 2013 calendar year).
If the result of this calculation is 50 or more, then the employer is an applicable large employer for all of the next calendar year unless the seasonal worker exception described below applies. Importantly, an employer’s status as an applicable large employer is fixed as of January 1 of a particular year. So, if an employer reduces its workforce to less than 50 full-time employees (and FTEs) during the year, that does not change the employer’s status as an applicable large employer for that year. In such a case, the employer may cease to be considered an applicable large employer only on the first day of the following year.
Seasonal Employee Exception: If an employer’s workforce exceeds 50 full-time employees and FTEs for 120 days or less (note: four calendar months may be treated as the equivalent of 120 days) during the preceding calendar year, and employees in excess of 50 who were employed during that period were seasonal workers, the employer is not an applicable large employer. The proposed regulations define “seasonal worker” as a worker who performs labor or services on a seasonal basis and provide that employers may apply a reasonable, good faith interpretation of this term until further guidance is issued.
Special Rule for New Employers: If an employer was not in existence for the entire preceding year, it will be treated as a large employer if it is reasonably expected that it will employ an average of at least 50 full-time employees (taking into account FTEs) on business days during the current calendar year and it actually employs an average of at least 50 full-time employees (including FTEs) on business days during the calendar year.
III. Is the coverage that my company currently offers sufficient to avoid an excise tax? (Minimum value/affordability requirements)
Under the new law, an applicable large employer may be subject to an excise tax if it fails to offer its full-time employees the opportunity to enroll in “minimum essential coverage” or if such coverage fails to provide minimum value or is unaffordable.
Step 1: Is the coverage my company offers minimum essential coverage?
The term “minimum essential coverage” refers to coverage under an eligible employer-sponsored plan (e.g., group health plan or group health insurance coverage). However, minimum essential coverage does not include coverage for excepted benefits such as liability insurance or workers’ compensation. Future regulations will provide further guidance as to what constitutes minimum essential coverage. In addition, future regulations should provide that coverage provided by a multi-employer (union) welfare fund will be treated as an eligible employer-sponsored plan.
Step 2. Does my company’s coverage provide minimum value?
To provide “minimum value,” the plan’s share of the total allowed cost of benefits provided must be at least 60 percent of these costs. The IRS and Department of Health and Human Services (DHHS) will make an online calculator available for this purpose. DHHS has proposed regulations providing guidance on methodologies for determining minimum value. The IRS and Treasury Department also intend to propose additional guidance regarding minimum value requirements.
Step 3: Is the coverage offered to full-time employees affordable?
Coverage is affordable if the full-time employee’s required contribution for employee-only coverage for the lowest cost option available (assuming it provides minimum value) does not exceed 9.5 percent of the employee’s household income for the year. Given the inherent difficulty of determining an employee’s household income, the proposed regulation includes three safe harbors for determining whether coverage is affordable for purposes of the shared responsibility rules.
Form W-2 Safe Harbor: Coverage is affordable if the required employee contribution toward self-coverage does not exceed 9.5 percent of the employee’s W-2 wages for that calendar year (as reported in Box 1 on the Form W-2). To qualify for this safe harbor, the employee’s required contribution must remain a consistent amount or percentage of W-2 wages during the year (the employer cannot make discretionary adjustments to the required employee contribution for a pay period). It is important to note that Box 1 of Form W-2 does not include amounts a participant elected to contribute to the company’s retirement or cafeteria plan. Special rules apply to employees who were not employed for the entire calendar year.
Rate of Pay Safe Harbor: Coverage is affordable if the employee’s required contribution amount for self-only coverage for the month is equal to or lower than 9.5 percent of the computed monthly wages. The computed monthly wage is determined on a per-employee basis. For hourly-paid employees, the computed monthly wage is determined by multiplying the employee’s hourly rate of pay at the beginning of the year by 130 hours per month. For salaried employees, the computed monthly wage is the employee’s monthly salary as of the beginning of the year. Because the rate of pay is determined at the beginning of the year, if an employee’s wages are increased during the year, the 9.5 percent cap must still be based on the lower rate of pay. This safe harbor is not available if the employer reduces the employee’s wages during the year. It is not clear whether a decrease in an employee’s wages at the request of the employee, such as a voluntary transfer of position, would violate this rule.
Federal Poverty Line Safe Harbor: Coverage is affordable if the employee’s required contribution for self-only coverage does not exceed 9.5 percent of the federal poverty line for a single individual, as determined based on the state in which the employee works.
IV. Who must be offered minimum essential coverage? (Determining full-time employee status)
As mentioned above, an excise tax may only be assessed if the applicable large employer either fails to offer coverage to a full-time employee or if the coverage offered to such full-time employee is either not affordable or does not provide minimum value. For this purpose, a full-time employee is an employee who works, on average, 30 or more hours per week during a month. The key, then, is to identify who are the full-time employees to whom such coverage must be offered.
Step 1. Decide whether full-time employee status will be determined on a monthly basis or whether the optional “look-back” rule will be used.
Technically, the determination as to whether an individual is a full-time employee can be made on a month-by-month basis. This would allow employers to move employees in and out of coverage on a monthly basis. However, this option may cause practical difficulties for employees whose full-time status is unclear (e.g., employees who are on the border of the satisfying the 30 hours of service per week requirement).
In recognition of the potential difficulties of applying these rules on a monthly basis, the proposed regulations allow employers to use an optional “look-back” rule to determine full-time employee status. Under the look-back rule, full-time status is determined by the hours credited during a look-back “measurement period” to determine whether an employee must be offered coverage during a subsequent “stability period.”
The remainder of this Section IV applies to employers who have elected to apply the look-back rules. Not all employers will need to apply the look-back rules. For example, an employer whose employees fall into clear categories, such as employees who always work 35 hours or more a week and those who always work 20 hours per week or less, should be able to make its full-time employee determinations on a month-by-month basis.
Step 2. Determine the measurement period.
The measurement period is a look-back period of at least three but not more than 12 months, as selected by the employer. This is the period during which an employee’s hours will be measured to determine if he or she is a full-time employee.
An employer can specify different measurement periods for the following categories of employees: (i) each group of collectively bargained employees governed by a separate collective bargaining agreement, (ii) collectively bargained and non-collectively bargained employees, (iii) salaried employees and hourly employees, and (iv) employees whose primary places of employment are in different states. Employers may change the measurement periods for future years but generally cannot change such periods once they have begun.
There are two types of measurement periods:
A measurement period for ongoing employees. The measurement period for ongoing employees is referred to as the “standard measurement period.”
A measurement period for new employees. This must be the same length as the standard measurement period, but the actual period will vary based on the employee’s date of hire. This measurement period is referred to as the “initial measurement period.”
Special rules permit employers to adjust the start and end dates of a measurement period in order to avoid splitting an employee’s regular payroll periods.
Step 3. Classify each employee as an “ongoing employee” or “new employee.”
The proposed regulations contain different look-back rules for ongoing employees and new employees. An “ongoing employee” is an employee who has been employed by an employer for at least one standard measurement period. Conversely, a “new employee” is any employee who has not been employed for at least one standard measurement period.
Special rules apply for purposes of determining whether an employee who is rehired (or returns from an unpaid leave of absence) is a new employee or ongoing employee. An employer may treat an employee who is rehired (or who returns from an unpaid leave) as a new employee if either (i) the employee incurs a break in service of at least 26 weeks, or (ii) the employee incurs a break in service that is longer than the greater of (a) four weeks, or (b) the employee’s period of employment immediately prior to the break in service. Otherwise, such employee must be treated as an ongoing employee.
Step 4: Apply the look-back rule to ongoing employees.
Under the look-back rule, an ongoing employee is determined to be a full-time employee (or not) by looking at the hours credited during the standard measurement period.
If the employee was paid for at least 30 hours per week on average during the standard measurement period, then he is treated as a full-time employee during a subsequent stability period, without regard to the employee’s actual hours of service during the stability period (assuming the employee is still employed). The length of the stability period must be the greater of (i) six months, or (ii) the length of the standard measurement period.
In general, the length of the stability period must be uniform for all employees. However, different stability periods may be applied for the following categories of employees: (i) each group of collectively bargained employees governed by a separate collective bargaining agreement, (ii) collectively bargained and non-collectively bargained employees, (iii) salaried employees and hourly employees, and (iv) employees whose primary places of employment are in different states. Employers may change the stability periods for future years but generally cannot change such periods once they have begun.
Transition Rule for 2014: Employers may use a 12-month stability period in 2014 if they adopt a transition measurement period that is shorter than 12 months but is no less than six months long and that begins no later than July 1, 2013 and ends no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2014.
If the employee was not paid for at least 30 hours per week on average during the standard measurement period, then his hours are re-measured at the end of the next standard measurement period to see if he qualifies as a full-time employee at that point.
Use of Administrative Period Permitted: The proposed regulations permit use of an administrative period of up to 90 days between the end of the standard measurement period and the start of the stability period to give employers time to notify and enroll employees. The administrative period must overlap with the prior stability period and cannot reduce or lengthen the measurement or stability period. This means that ongoing employees who are enrolled in coverage because of their status as full-time employees based on a prior standard measurement period must continue to be covered through the administrative period.
Special Rules for Employees Who Return After a Break-in-Service: If the employee who returns to employment after a break-in-service is treated as an ongoing employee, the measurement and stability period that would have applied if the employee had not experienced the break-in-service continues to apply. In addition, for special periods of leave (e.g., FMLA, USERRA, jury duty), hours of service per week for an employee treated as an ongoing employee is determined either by (i) excluding the special unpaid leave period or (ii) crediting the employee with hours of service during leave at a rate equal to the average weekly rate at which the employee was credited with hours of service during the measurement period, excluding the special leave period.
Step 5. Apply the look-back rule to new variable hour/seasonal employees.
Step 5.1. Determine whether the new employee is a full-time employee or variable hour/seasonal employee.
The look-back rules for new employees differ depending on whether the new employee is a full-time employee or a variable hour/seasonal employee. A new employee is a full-time employee if the employee is reasonably expected to be employed on average at least 30 hours of service per week (and is not a seasonal employee).
On the other hand, a new employee is a variable hour employee if, based on facts and circumstances, it cannot be determined that the employee is reasonably expected to be employed on average at least 30 hours per week. Beginning January 1, 2015, unless the employee is a seasonal employee, the employer must assume that the employee will continue to be employed by the employer for the entire initial measurement period (i.e., employers can’t take into account the likelihood that the employee’s employment will terminate before the end of the initial measurement period).
Step 5.2. Offer coverage to new full-time employees within three months.
If a new employee is a full-time employee, an employer must offer coverage to the employee at or before the conclusion of the employee’s three initial calendar months of employment to avoid excise taxes. The initial measurement period and initial stability period concepts described below do not apply to these employees.
Step 5.3. Apply look-back rule for variable hour/seasonal employees.
If a new employee is a variable hour or seasonal employee, an employer applying the look-back rule will analyze such employee’s hours during the initial measurement period to determine whether the employee must be offered coverage during the subsequent stability period. To the extent a variable hour or seasonal employee is employed at least 30 hours per week on average during the initial measurement period, he is treated as a full-time employee during the subsequent stability period, without regard to the employee’s actual hours of service during the stability period (provided that the employee remains employed).
Initial Measurement Period: As discussed above, an employer may use an initial measurement period of between three and 12 months (the same as allowed for ongoing employees) that begins on any date between the employee’s start date and the first day of the calendar month following the employee’s start date.
Administrative Period: An employer also may use an administrative period of up to 90 days for variable hour and seasonal employees. However, the initial measurement period and administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date (totaling, at most, 13 months and a fraction of a month).
Length of Stability Period: The length of the stability period depends on whether an employee qualified as a full-time employee during the initial measurement period. If the employee is determined to be a full-time employee during the initial measurement period, the length of the stability period is the greater of (i) six months, or (ii) the length of the initial measurement period.
On the other hand, if the employee does not qualify as a full-time employee during the initial measurement period, the length of the stability period cannot be more than one month longer than the initial measurement period and must not exceed the remainder of the standard measurement period (plus any associated administrative period) in which the initial measurement period ends. Put differently, the employee has to be re-measured as of the end of the standard measurement period, even if that period overlaps with the employee’s initial measurement period.
Transition Rule for 2014: Employers may use a 12-month stability period in 2014 if they adopt a transition measurement period that is shorter than 12 months but is no less than six months long and that begins no later than July 1, 2013 and ends no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2014.
Special Rule for New Employees Who Have a Change in Status: A new variable hour or seasonal employee who has a change in employment status during an initial measurement period is treated as a full-time employee as of the first day of the fourth month following the change in employment status (or, if earlier and the employee averages more than 30 hours of service per week during the initial measurement period, the first day of the first month following the end of the initial measurement period). On the other hand, a change in employment status will not affect the classification of an ongoing employee as a full-time employee (or non-full-time employee) during the stability period.
For this purpose, a “change in employment status” is a change in the position of employment or employment status that, had the employee begun employment in the new position or status, would have resulted in the employee being reasonably expected to be employed on average at least 30 hours of service per week.
V. What happens if I don’t comply with the rules described above? (Excise taxes under Code § 4980H)
Although the determination of applicable large employer status is made on a controlled group basis, the excise tax provisions apply on a member-by-member basis.
The excise taxes under Code § 4980H are triggered only if a full-time employee is certified to receive a premium tax credit or cost-sharing reduction with respect to his purchase of insurance on the new exchanges. To the extent no full-time employee is eligible for a premium tax credit or cost-sharing reduction, the excise taxes under Code § 4980H will not apply. The IRS will notify an employer after the end of each calendar year if any of that employer’s employees received a premium tax credit or cost-sharing reduction with respect to exchange coverage.
There are two types of excise taxes that may apply.
First Excise Tax: Failure to offer coverage to at least 95 percent of the employer’s full-time employees (and their dependents).
To avoid the first excise tax, an applicable large employer must offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an applicable employer-sponsored plan.
An applicable large employer is treated as offering coverage to its full-time employees (and their dependents) for a calendar month if, for that month, it offers coverage to all but five percent (or, if greater, five) of its full-time employees. For this purpose, the term “dependents” means an employee’s child who is under 26 years of age. The regulations do not require employers to offer coverage to an employee’s spouse. In addition, under a special transition rule, any employer that takes steps during its 2014 plan year toward offering coverage to dependents will not be liable for excise taxes under Code § 4980H solely for failure to offer coverage to dependents for that plan year.
To the extent an employer fails to offer minimum essential coverage to at least 95 percent of the employer’s full-time employees (and their dependents), the employer will be subject to an excise tax.
The amount of the excise tax for this failure for a given calendar month is equal to the number of full-time employees of the applicable large employer member multiplied by $166.67 ($2,000 divided by 12). The amount of the penalty will be adjusted for inflation in future years.
For purposes of computing this excise tax, the number of individuals employed by an applicable large employer as full-time employees is reduced by 30. The 30-employee reduction is applied on a controlled group basis, with the reduction allocated ratably among the members of the applicable large employer based on each member’s number of full-time employees.
Second Excise Tax: Failure to provide coverage that is not affordable or does not provide minimum value or does not provide minimum value.
If an applicable large employer member offers at least 95 percent of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, it might still be subject to a second excise tax if either (i) the coverage is unaffordable, or (ii) the coverage does not provide minimum value.
The amount of the excise tax for this failure for a given calendar month is equal to the lesser of (i) the number of full-time employees who received an applicable premium tax credit or cost-sharing reduction, multiplied by $250 ($3,000 divided by 12), adjusted for inflation in future years, or (ii) the amount of the penalty that would have been imposed under the first excise tax provision if the employer had failed to offer coverage to its full-time employees (and their dependents).
— Nick Dubrowsky (@NDubrowskyLaw) January 25, 2013
Here’s an excerpt:
The new Boeing 787 Dreamliner can carry about 250 passengers. This blog was viewed about 1,800 times in 2012. If it were a Dreamliner, it would take about 7 trips to carry that many people.