Hearing of the House Small Business Committee - The Health Care Law: The Effect of the Business Aggregation Rules on Small Employers

Hearing

Thank you, Mr. Chairman. Small businesses are the backbone of our economy, but in the past high health care costs and declining coverage have hindered small business owners and their employees. These factors have hampered our nation's entrepreneurial prowess and held back small businesses.

But, this is no more. The Affordable Care Act has changed the health care landscape for small firms. It has expanded coverage options, increased purchasing power, and gave consumers control over their own health care.

Yet, as with any law of this magnitude, some fixes will need to be made along the way. That means listening to the feedback of those most affected and working together to ensure small firms secure quality, affordable health care. Today we will do just that by hearing from witnesses about a complicated issue catching some small firms by surprise.

The health care law includes an employer mandate that requires businesses with more than 50 full-time employees to provide health insurance. Its goal is to discourage employers from dropping coverage and leaving employees on their own to find insurance. While the enforcement of these rules has been delayed until 2015, many small employers must begin adapting now.

This hearing will focus on a particular area of the law that many small firms may not be familiar with -- the business aggregation rules. Traditionally, these rules have been used to treat separate businesses as a single employer for purposes of retirement plans.

These tax rules were incorporated into proposed regulations to deter entities from splitting into smaller companies with the purpose of avoiding the employer mandate. The intent behind this regulation is admirable -- but I remain concerned about how these very complex rules impact small firms.

I am sure it came as little surprise to many tax experts that these rules are being employed to determine businesses' sizes. Unfortunately, for many family-owned businesses and franchise owners these rules are not common place. For that reason, we must consider how the business aggregation rules impact many entrepreneurs' business models.

Though some small employers have already been applying these rules to comply with ERISA, other firms have a steep learning curve ahead of them. I hope our hearing today provides more information on just how many small employers currently navigate these rules and -- how many more will be newly affected.

Our witnesses today will help walk us through these complicated standards and how best to educate owners of their nuances. With careful planning and proper outreach, small employers may avoid many pitfalls when complying with new obligations under the ACA.

I thank all the witnesses for being here and I look forward to your comments.

Thank you and I yield back.

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