Some jobs restructured due to health costs

CHANGING ENVIRONMENT: Robert F. Calise, principal with Cornerstone Group, speaks with senior benefits consultant Jim Borah, right. Calise says deciding how to structure positions while covering health care costs and avoiding penalties for noncompliance is a new challenge for companies. / PBN PHOTO/MICHAEL SALERNO
CHANGING ENVIRONMENT: Robert F. Calise, principal with Cornerstone Group, speaks with senior benefits consultant Jim Borah, right. Calise says deciding how to structure positions while covering health care costs and avoiding penalties for noncompliance is a new challenge for companies. / PBN PHOTO/MICHAEL SALERNO

Some employers are restructuring part-time positions as they struggle to manage expenses for workers whose extra hours may make them eligible for health care benefits.

The number of affected employers is small but noticeable, according to one Rhode Island broker, a Central Rhode Island Chamber of Commerce official, a lawyer and two certified public accountants.

The reason employers, who wouldn’t talk on the record, are struggling with this is because the federal mandate that companies provide health insurance to 95 percent of their full-time employees is affecting firms’ bottom lines, says Rob Calise, a principal with the Warwick brokerage firm the Cornerstone Group.

The federal government defines full time as 30 hours or more a week, but some part-time workers end up working some full-time hours, making them eligible for an extension of benefits. That costs employers money that might be otherwise going to things like raises and basic business expenses, Calise and others say.

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At the Cornerstone Group, as many as 60 of the firm’s 1,000 clients (among them, 300 who employ 50 workers or more) are trying to manage their employees by compressing hours to minimize how much health care coverage they have to provide.

“We do see it and it’s a conversation we have with a lot of employers about how to manage variable employees,” Calise said.

According to federal law, the “employer mandate,” delayed in February to 2015-16, requires all businesses with 50 or more full-time equivalent employees to provide health insurance to at least 95 percent of full-time workers and dependents up to age 26, or pay a flat fee, a penalty, that begins at $2,000 per worker after the first 30 workers are counted.

Firms with a 100 or more full-time-equivalent employees and average annual wages above $250,000 have to insure at least 70 percent of their full-time workers by 2015 and 95 percent by 2016. Small businesses with 50 to 99 FTEs will need to start insuring full-time workers by 2016, while those with 49 or less are not liable.

According to the R.I. Department of Labor and Training’s Current Population Survey, which provides the monthly unemployment rate and other labor-force statistics, 20.8 percent of the state’s residents a month, or on average 106,300 of the state’s 510,900 workers, worked part time in 2014.

Most employers don’t have trouble meeting the 95 percent mandate, noted Sam Slade, employee-benefit practice leader for the Rhode Island benefits office of USI, a national brokerage firm based in Valhalla, N.Y. Many, however, are now being more careful tracking workers with hours that fluctuate between full and part time, he said.

Calise and others say deciding how to structure positions while covering health care costs and avoiding incurring penalties for noncompliance is a new challenge.

Grafton “Cap” Willey, a managing director with CBIZ Tofias in Providence, and Gerald “Jay” Benson, a tax manager with Otrando Porcaro & Associates of Warwick, both confirmed that. Benson also is chairman for the tax committee for the Rhode Island Society for CPAs.

William E. O’Gara, who leads employment law and litigation teams at Pannone, Lopes, Devereaux & West in Providence, confirmed it as well. None of them would identify employers taking restructuring measures, however.

“You’re hearing about a small number,” acknowledged Benson. “There are far more out there who aren’t talking about it because they don’t want to be seen in a negative light, but the challenge is money. It’s their bottom line. If they have to spend more money by regulation [on benefits to avoid penalties], it’s less money coming in.”

Citing one client he declined to identify with “hundreds” of employees, Benson said, “They’re cutting hours, bringing people back to under full-time employment and looking to any other thing they can do to help [alleviate] this cost. It’s a huge expense.”

Benson said his firm is not recommending to employers what type of action to take, but “advising them as to what penalties there could be for noncompliance.”

Lauren E.I. Slocum, president and CEO of the Central Rhode Island Chamber of Commerce, which has 800 members, said there is a “small but noticeable number” of businesses – up to a dozen – in her region that have decided either to not hire for 30 hours or re-evaluate the positions and the responsibilities that go with them.

“It’s a very delicate topic,” Slocum said. “It’s not a right or wrong [decision]. It’s what is best, and it’s different from company to company.” •

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