Since the landmark 2012 U.S. Supreme Court decision in NFIB v. Sebelius, largely upholding President Obama's Patient Protection and Affordable Care Act (the "ACA"), the U.S. government has been moving full-steam ahead on implementation of healthcare reform mandated by the ACA. The ACA places a number of new regulations, restrictions, and requirements on employers, including U.S. companies employing foreign workers, and potentially foreign companies, depending on various factors, including those outlined below in this article.
The U.S. Internal Revenue Service ("IRS") is currently
in the process of finalizing its Proposed Regulations implementing
an aspect of the ACA known as the "employer shared
responsibility" obligations, or more commonly, the
"Employer Mandate." Beginning on January 1, 2014, the
Employer Mandate generally requires "applicable large
employers" to offer their full-time employees (and their
dependents) the opportunity to enroll in "minimum essential
coverage" under an eligible employer-sponsored healthcare plan
or face a tax penalty based on the number of full-time employees
receiving government-subsidized healthcare coverage.
Foreign companies may be subject to the Employer Mandate if they
employed an average of 50 or more "full-time employees"
during the preceding calendar year. "Full-time employees"
are employees who are employed on average 30 or more hours of
service per week within respect to any month (or 130 hours of
service in a calendar month), provided the compensation for those
hours constitutes U.S.-source income under U.S. tax laws. Excluded
from the calculus are hours of work performed by employees to the
extent the compensation constitutes foreign-source income under
U.S. tax laws.
Thus, the definition of "full-time employee" is not
limited to U.S. citizens, nor are companies exempt from these
determinations solely based on their foreign status. Rather, the
primary determination for purposes of the Employer Mandate is based
on hours worked by employees for U.S.-source compensation.
The intricacies of the Employer Mandate quickly add up. For
example, there are special considerations for closely-related
entities (e.g., parent and subsidiaries), successor companies, new
companies, multi-employer healthcare plans, etc. Similarly, the
Proposed Regulations provide specific methods to determine an
employee's "full-time" status. The analysis for
this determination can quickly become complicated based on issues
such as lengths of measuring periods to determine an employee's
"full-time" status, breaks in employment, and whether or
not employees are "full time equivalent" employees, new
employees, or seasonal workers.
In addition, open questions remain regarding treatment of
temporary guest workers such as seasonal H-2A agricultural guest
workers, for purposes of the Employer Mandate. During the formal
comment period for the Proposed Regulations, several comments were
submitted seeking a complete exemption for temporary guest workers
for purposes of the Employer Mandate, or at least from specific
provisions (such as from a special rule regarding treatment in
breaks of employment).
2014 is quickly approaching. Employers, both foreign and domestic,
should pay close attention as the IRS finalizes its regulations
implementing the Employer Mandate. The formal comment period for
the Proposed Regulations closed March 18. A hearing for public
comments is scheduled for April 23. Following the public hearing,
the IRS will then issue final regulations implementing the Employer
Mandate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.