The Internal Revenue Service (IRS) is trying to preventemployers from getting around the new “play or pay” health benefitsrules by reclassifying full-time workers as something else.

The IRS talk about methods for classifying specific types ofworkers, such as teachers, airline pilots and rehired workers, inthe preamble to draft regulations for implementing the “sharedresponsibility” parts of the Patient Protection and Affordable Care Act(PPACA).

The IRS also covers topics such as use of staffing agencies toavoid the PPACA benefits requirements and how to determine whetherthe benefits provided meet PPACA affordability standards.

IRS officials suggest in the preamble that employers and theiradvisers should avoid using complicated strategies to try tominimize the number of workers who are eligible for group healthbenefits under PPACA.

The IRS would take a dim view of an employer that failed toinclude travel hours in a sales rep's hours or preparation time inthe hours of a college instructor, officials said in the shared responsibility draft regulations, whichare set to appear in the Federal Register Wednesday.

IRS officials elaborate on the proposed regulations in a set ofanswers to frequently asked questions(FAQ).

When there are questions about how to count a worker's hours,the employer “must use a reasonable method for crediting hours ofservice,” officials said in the preamble. “A method of creditinghours would not be reasonable if it took into account only some ofan employee's hours of service.” Officials said the IRS is workingon a “general anti-abuse” rule to keep employers from usingstrategies such as employing a worker directly for 20 hours perweek and employing the worker through a staffing agency for therest of the week.

PPACA calls for employers with more than 50full-time equivalent employees to provide a minimum level of healthbenefits for year-round employees who work more than 30 hours perweek. Workers who do not offer the minimum level of coverage, orfail to ensure that the coverage meets affordability requirements,are supposed to pay penalties. PPACA added a section to theInternal Revenue Code (IRC), IRC Section 4980H, that governs howthe IRS is supposed to go about applying the shared responsibilitypenalty provisions.

Comments on the proposed regulations are due March 18.

The IRS is planning to hold a public hearing on the draft April23.

The IRS wrote the proposed regulations after asking members ofthe public to react to notices describing the general approach theagency might take in the regulations.

In response to questions about how the IRS would interpret the“30 hours per week” rule, officials said the agency would view aworker who worked 130 hours in a month as being comparable to aworker who worked 30 hours per week.

One controversy has centered on the term “affordability.” TheIRS has proposed that employers be allowed to treat coverage asaffordable if a worker's share of the cost of worker-only coveragewere less than or equal to 9.5 percent of the worker's W-2 wages.Workers and group representing workers argued that the IRSsuggestion could cause problems for workers with families, whomight be able to afford coverage for themselves but not for spousesand children.

Employer groups said employers would have no practical way toknow anything about a worker's overall household income.

In the proposed regulations, the IRS said it wants to let anemployer stick with W-2 wages and the worker's share of the cost ofself-only coverage when complying with the shared responsibilityrequirements.

Workers will be able to use their overall family size and totalhousehold income when they are trying to qualify for public healthprograms and government help with paying for private coverage,officials said

See also:

• IRS and PPACA: What's a Full-Time Employee?
• Regulators Interpret the 90-Day Waiting Period Limit
• IRS: We'll Address Shared Responsibility Soon

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