Holding Companies and Determining the ACA Employer Mandate

Provisions of the ACA employer mandate might come as a surprise to holding companies and their subsidiaries.

Decentralized subsidiary companies with fewer than 100 employees that are selecting their own benefit plans need to take a close look at the employer mandate of the Affordable Care Act (ACA).

“Companies with a common owner or that are otherwise related under certain rules of section 414 of the Internal Revenue Code are generally combined and treated as a single employer for determining ALE status.”

The determination of whether separate companies within a controlled group are subject to the mandate (and the effective date of compliance) must be made on the employee head count of all the companies combined. So, if all the subsidiaries combined have more than 50 employees, the ACA employer mandate will apply.

Please visit the IRS website  “Determining if an Employer is an Applicable Large Employer” and read Employer Aggregation Rules, Example 3.

See Q&A #s6 and 42 on the IRS Website employer shared responsibility provisions questions and answers page for more information.

For more information on the IRS Controlled Group Rules: http://www.irs.gov/pub/irs-tege/epchd704.pdf

Sources:

1. Coan, Mike. “Holding Companies, Beware: The Affordable Care Act is Here.” PSA Perspective – PSA Financial, 17 September 2014. Web. 11 August 2015.

2. IRS

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