Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.


Director of Business Development Elizabeth Fullington, CPA, JD at Global Resources, addresses common myths.

Q: Can the 50 employee rule (the mandate that all businesses with 50 or more employees provide health insurance) be avoided by splitting a business into multiple corporations?

Elizabeth Fullington
Elizabeth Fullington

Fullington: Under the Internal Revenue Code and Treasury regulations, all employees of related companies will be considered in determining whether any company has exceeded the 50-employee rule. Thus, splitting a company into multiple, smaller companies will not help a business in avoiding the mandate. Even worse, reliance on this myth exposes business owners to crippling penalties and taxes.

Q: Should a business use the strategy of only employing part-time employees to avoid the 50 employee rule?

Fullington: Another myth is that businesses can avoid the mandate by reducing current employees to part-time, hire more part-time workers, or classify employees as ‘independent contractors.’

Part-time employees are considered in determining whether the 50 employee rule is satisfied. Using independent contractors to avoid the mandate is problematic as the IRS aggressively audits worker classification. It is impossible to reclassify current employees as independent contractors without a drastic change in their compensation, oversight, and status. There are also no mitigating safe harbors from the penalties imposed by the Act for past employment misclassifications (unlike those from past payroll tax assessments).

Rather than relying on misguided strategies to avoid the mandate, a business owner should strive to reduce health care costs by providing tax advantaged benefit plans that comply with the mandate.

Q: How are employees determined to be full-time or part-time?

Fullington: For purposes of the Affordable Care Act, both full-time and part-time employees are used to determine the 50 employee threshold:

  • Full-Time (Employees working at least 30 hours per week in any month) – Counted as one full-time employee.
  • Part-Time – Calculated by taking the hours worked by all part-time employees in a month, divided by 120, and rounded down to the nearest whole number.
  • Seasonal – Not counted for those working up to 120 days in a year.

Example: A company has 40 full-time and 10 part-time workers. The total part-time hours per month are 1,150. Under the Act, the company has 49 full-time equivalent employees (40 full-time employees, and 9 full-time equivalents).

Q: How likely is the Act to hinder small businesses?

Fullington: When the media says that “Obamacare, or the Act, has been delayed,” they are referencing the health care compliance portion. It is important for business owners to realize that new taxes are in place, currently, such as the 3.8% Medicare Contribution Tax on passive income and a new .9% Medicare Excise Tax.

A misguided owner may face a much higher tax burden than anticipated, which could impact cash flow and the ability to make purchases, expand the business, make payroll, or even take on a new project.