Is the Affordable Care Act coming to a strip club near you? For years, strip clubs have classified dancers as independent contractors and denied them benefits. A few states have pushed back against this classification, but, the IRS has been noticeably absent other than to provide a regulatory framework to determine if someone is an employee or not. That's about to change in a big way.
Small businesses, defined as those with 50 or fewer, full time employees, defined as working more than 30 hours per week, are exempt from the Affordable Care Act. Also known as Obamacare. This is where things get tricky. The ACA puts the Internal Revenue in charge of enforcing the ACA's participation provisions as well as providing tax breaks for low income people who sign up for ACA. Forbes has a story going into some of the rules surrounding how employers will figure out if they are small businesses and thus exempt from the ACA. The President used the flexibility that he and he alone sees in the ACA to extend the deadline for small businesses to participate in the ACA until after next year's election. A bad idea on many levels, but at least it gives us small business owners time to figure out if we are small enough to avoid the ACA's penalties or if we have to comply. Compliance is yet another problem. Trust me, I have weighed the issue of continuing my company's health care benefits or terminating them in favor of sending my employees off to the ACA exchange. I ultimately decided that I would keep my company's heath care benefits because I think it's important to keep my employees productive. Private health insurance is the best way to do that. Even if it is expensive. I pay about $7,000/year for a single employee up to $13,000/year for family coverage. Since I pay it all, that means my lowest paid full time employee costs me about $65,000/year. In all honesty, that means my lowest paid employee better generate $130,000 worth of revenue. In other words, don't apply without a significant skill set to go with a high school diploma and a great work ethic. To be a successful applicant at my business, someone better come in with a community college technical degree, a HS diploma and a solid work history or off the charts recommendations from faculty.
Back to strip clubs though, how do the new IRS regulations work? Well, the IRS will be assessing a penalty for any club with more than 50 employees that does not provide health coverage at least at the ACA minimum. How will the IRS determine how many employees a club has? Well, they have a 20 part test. One part is a contract. No written contract and they won't even look at the other 19 parts. A person working without a written contract specifically saying they are are an independent contractor is an employee. If there is a written contract, the IRS goes to the other 19 parts. Frankly too many to list here, but the list is exhaustive. I had a sit down with my accountant last week to discuss if we were subject to the 50 employee rule even though I offer health insurance, and pay for it. Because I already comply, she said there was no point in doing the analysis. But, she added, the analysis is roughly half an hour to an hour per person. More if it's a close call.
YIKES! Do you know how expensive that is for a strip club? Figure 100 dancers at any one time, some coming in on a somewhat regular basis, some less so and some when they dang well please. Even 50 hours of an accountants time is some serious change. And all to be told, you probably need to count them. Also there is the full time (30 hours per week) rule and a separate rule for full time equivalents. So, if you have part time employees, add up their time per week and divide by 30. A business could be subject to the ACA even if it had only one or two full time employees but enough "full time equivalents." Giving everyone health insurance is probably a good idea. Doing it through the ACA is just expensive and probably doomed to failure.
Z



Reply With Quote

Bookmarks