Since the landmark 2012 U.S. Supreme Court decision in NFIB
v. Sebelius [an enhanced version of this opinion is available to lexis.com
subscribers], 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
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
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