Fleets Could Face Large Tax Penalties From Health Care Law, Expert Warns

This story appears in the June 17 print edition of Transport Topics.

LA JOLLA, Calif. — Trucking companies could face hefty tax penalties if they are not prepared for provisions of the federal health care law that go into effect next year, a financial consultant warned.

“It’s difficult, it’s hard, it’s complex, and if your organization hasn’t spent a lot of time working on it, now is definitely the time to do it,” Sharon Whittle, a principal at consulting firm Grant Thornton, said of the Patient Protection and Affordable Care Act.

She spoke here June 12 at the annual conference of American Trucking Associations’ National Accounting & Finance Council. Fleet executives at the conference said complying with the law will add another significant administrative burden.

Specifically, Whittle said employers with 50 or more full-time employees could be subject to a new excise tax next year if they do not offer health care coverage to at least 95% of their workers. If they do not meet that threshold, companies could have to pay up to $2,000 a year for each worker they employ, after the initial 30 employees, Whittle said.

As a result, a company with 100 full-time employees that does not offer health care could face a payment of $140,000 annually, she said.

Many employers offer coverage to almost all full-time employees, but Whittle said they should not simply assume that they’ll satisfy the 95% threshold because of “complex” Internal Revenue Service rules covering who is a full-time employee.

Whittle recommended that carriers who use owner-operators discuss their status with legal counsel to make sure the owner-operators won’t count as full-time employees under the law.

Also starting next year, employers will need to satisfy “affordability” and “minimum value” requirements for the coverage they offer or they might be subject to another excise tax that could amount to $3,000 per year per employee. To meet these requirements, employee premiums must be 9.5% or less than the employee’s household income, and the plan must cover at least 60% of the costs, Whittle said.

Looking to 2018, Whittle warned the law also includes a separate, 40% excise tax on high-cost, or “Cadillac,” plans.

Given the overall complexity of the requirements, health care plans no longer will be just a human resources function, she said.

“It’s going to take a blend of people with different skill sets in your organization for you to feel comfortable that you’re managing your risk exposure properly,” Whittle said.

Following the session, carrier executives expressed a number of concerns.

“Just the whole administration of the plan is going to require a lot of man-hours, and I don’t know of any trucking companies that don’t run lean, so it’s quite a burden that government has placed on business,” said Terry Croslow, chief financial officer at Venture Express Inc., based in La Vergne, Tenn.

Croslow also said he’s worried about the convergence of the requirements to offer affordable and minimum value coverage on one hand, while at the same time keeping plans below the upper threshold in 2018.

Russ Burleson Jr., senior vice president of finance at Southeastern Freight Lines Inc., Columbia, S.C., said his company already offers health care to all of its full-time employees, but it’s not necessarily that simple when it comes to the new requirements.

“The question is: What is a full-time employee?” he asked.

Curtis Leonard, a managing partner at Eberhart Capital, which owns refrigerated carrier Poling Express, expressed similar concerns.

“It’s going to be more work,” he said. “It’s no longer just an HR function. This is now going to be about tax consequences, and we’ll have to look at it from the accounting side.”

The 95% threshold also is a concern for Summerford Truck Line Inc., a flatbed hauler based in Ashford, Ala., that runs 51 trucks.

The family-owned company also operates nontransportation businesses, which include some part-time and seasonal employees. That is adding to the overall complexity, said Shane Fundum, the company’s chief financial officer.