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ACA Employer Requirements for Restaurant Owners

November 19, 2015

The ACA presents some unique challenges for the restaurant industry but fortunately there are a few tips to help you stay ACA compliant.

The Affordable Care Act (ACA) has posed unique problems to the healthcare industry and the insurance world, but what about the restaurant industry? Research shows that complying with the ACA is a costly venture for restaurants, costing between $10,000 and $30,000 per business. It is important that you are fully informed of laws under the ACA and how they affect your business.

The ACA’s potential effect on your business

There are various ways the ACA could affect your restaurant. This includes:

  • 30 hour workweek rule- You need to keep a list of all part and full time workers and monitor the number of hours worked by each person. Under the ACA’s 30 hour workweek rule, any employee working 30 hours or more is considered full time (previously 40 hours was considered full time). Employees in the restaurant industry typically work between 30-36 hours, making employers have to decide whether to pay their employees’ coverage or cut their hours.
  • Financial implications- Since restaurants employ large workforces while conducting business along thin margins, making sure every full time employee is insured is a costly operation. These increased costs will impact the bottom line. The business will need to cover the extra costs by increasing menu prices and/or cutting other costs where possible (without negatively impacting quality or the customer experience). If handled incorrectly, the business may not survive.
  • Multiple businesses under the same/similar ownership- Different restaurants with the same or similar ownership are counted as a single organization under the ACA, which makes compliance over multiple restaurants a very burdensome job for the employer.

How can my restaurant stay compliant?

Here are some options you have to maintain an ACA compliant restaurant:

  1. Look into all potential options for insurance coverage. It’s best to spend time looking into all potential offerings. Select coverage by choosing a provider that reduces costs by doing things like offering wholesale drugs, and keeping an eye on employee’s use of insurance.
  2. Offer multiple coverage choices. Some of your employees might be eligible for Medicaid. For others, you can offer a minimum essential coverage plan provided they meet certain requirements. To avoid any penalties, you are required to provide this to all employees who work 30 or more hours per week. Lastly, offer a minimum value plan with a high premium and co-pay deductible. Keep in mind that a minimum value plan covers at least 60% of covered charges, and any employer with 50 or more full-time employees will be required to pay a penalty if they do not provide this “minimum value”.
  3. Carefully select your broker. It is crucial that you spend time selecting the right broker—a professional with extensive experience in the industry and a good reputation. Shop around for references and recommendations from other similarly sized businesses.

Can I drop coverage and provide a raise for my employees instead?

Some companies with less than 100 employees consider dropping coverage so they can provide a raise to employees so the employees can acquire exchange coverage instead. This option presents its difficulties, however:

  • Providing coverage to an employee is a non-taxable benefit to employees. If you decided to drop coverage and pay the same amount to employees in the form of a raise, it is no longer a non-taxable item. The raise is subject to payroll and income taxes.
  • What's left after taxes is what the employee has available to get his or her own coverage.
  • There's also an added cost to the employer since the business matches social security and Medicare taxes withheld from the additional wages.

If you are considering this option, be sure to factor in the impact of the additional taxes to both parties.

Offering your employees good AND affordable coverage depends on conducting the right research. You will keep your business running smoothly by working to offset the ACA’s potential effects on your restaurant.

Read our blog, “Getting Serious About ACA Information Reporting Requirements” for more information on ACA reporting for the 2015 tax year.

Questions? Contact any member of our Hospitality Services Group.

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