Client Question: Does Affordable Care Act coverage mandates apply to controlled groups?

  • July 23, 2014
  • David Shindel

connected businessesBusiness owners with multiple related entities that might not separately fall under ACA mandate guidelines might do so when considered in whole with the rest of the business.  The distinction lies in whether or not the entities are part of a controlled group.

Sections 1563 and 414(c) of the tax code includes both “Controlling Interest” ownership tests and “Effective Control” tests counting five or fewer owners.  A controlling interest is 80% or more ownership overall; effective control is identical ownership of more than 50%.

Obamacare includes “all employees of a controlled group under sections 414(b) or (c), or an affiliated service group under sections 414 (b) or (c) or 4980H(c)(2)(C)(i).  The guidance on this do not differentiate between effective control and controlling interest percentages.  Every example cited in the literature (including the IRS advisories) all use both the controlling interest % and the effective control %.

There are also coverage requirements for any “Affiliated Service Groups” (“a group of businesses working together to provide services to each other or jointly to customers”) for which ownership is not relevant.

To determine if your entity is part of a controlled group, or to confirm your company is following the ACA mandates correctly, please contact your ShindelRock professional.