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National Restaurant Association - NRA testimony: Simplify ACA's business aggregation rules

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NRA testimony: Simplify ACA's business aggregation rules

The aggregation rules used to determine the employer and the size of the employer’s workforce under the Affordable Care Act are confusing and overly complicated, Tradelogic CEO Ellis Winstanley told the House Small Business Committee Wednesday.

Testifying on behalf of the National Restaurant Association, Winstanley, a partner in eight restaurants whose Austin, Texas-based company specializes in acquisitions and operations of hospitality, construction, software, and other businesses, told committee members that restaurants are being forced to turn to costly tax advisors to determine whether they are considered one employer or multiple employers for the purpose of the health care law. The ACA defines an employer using the aggregation rules based on common ownership in the tax code.

The committee hearing, “The Health Care Law: The Effect of the Business Aggregation Rules on Small Employers,” was called to examine the process of determining whether businesses are considered single or multiple employers under the health care law.

A central problem, Winstanley told committee members, is that many restaurants operate as separate legal entities but are owned by many of the same partners.

In many cases, the ACA will require these separate businesses to combine their employees to determine if they meet the 50-full-time-equivalent employee threshold because of common ownership. So under these “aggregation rules,” even businesses that average fewer than 50 full-time-equivalent employees individually may be covered by the ACA’s employer mandate, Winstanley said.

However, he noted, small businesses are unable to interpret the tax code’s “common control” provisions without outside advice.

“Given the lack of easily understood guidance, restaurant and foodservice operators are forced to hire expensive tax advisors to determine how the complicated rules and regulations associated with this section of the tax code apply to their specific situations,” Winstanley said.

Determining the employer is the first step for many restaurant operators in figuring out how the law impacts them.  From there, they must determine whether their business is a large employer and take into account the number of employees and hours worked by full- and part-time employees during the previous calendar year. The aggregation rules, combined with the fact that restaurants often employ large numbers of seasonal employees, can make it challenging for restaurants to determine whether they are large employers.

The lack of an easy way to determine an employer’s status will force hiring changes, Winstanley said. “It stifles smaller employers’ ability to manage their workforces, expand their businesses and prepare to offer health care coverage,” he said.

Simplification of the large-employer calculation, including the aggregation rules, is among the NRA’s top health care advocacy priorities. For more on how the health care law will impact your business, including tools to help you understand and implement the law, visit the NRA’s Health Care Knowledge Center

Tell Congress to make reasonable changes to the health care law.

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