Trying to Avoid ACA Mandate? ERISA 510 May Catch You, in Law360August 22, 2013
Adam C. Solander, an Associate in the Health Care and Life Sciences practice, coauthored an article titled "Trying to Avoid ACA Mandate? ERISA 510 May Catch You."
Following is an excerpt:
The employer mandate provision of the Affordable Care Act requires that applicable large employers — those with 50 or more full-time equivalent employees — provide health insurance to their full-time employees or pay a tax penalty. Significantly, the ACA defines a full-time employee as anyone who works on average 30 hours or more each week. Especially in industries that employ high numbers of part-time employees, this definitional change has the potential to greatly expand the number of employees eligible for employer-sponsored coverage.
In response to this change, employers are analyzing their workforces to determine how best to comply with the ACA mandates, while also reducing the potential financial impact from having to provide coverage or pay a penalty for all such full-time employees. A common response from employers has been to employ certain "workforce management" techniques to reduce some or all employee hours to below 30 hour per week in order to reduce the number of full-time employees for whom they are responsible under the mandate.
While this type of workforce management seems a rational response that would be permitted by the ACA, employers may well be stepping out of the frying pan and into the fire, due to certain provisions of the Employee Retirement Income Security Act of 1974, as amended.
Plaintiffs attorneys and other commentators are warning that employers who modify their employees' hours of work to prevent their qualification as a full-time employee may be running afoul of Section 510. In general, ERISA Section 510 was enacted in order to prevent unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights.