Employers on the hook for $228 billion in ACA penalties

2016 brought enforcement of required reporting for the Affordable Care Act (ACA) and thousands of US employers are not in compliance with the laws. This is going to translate into billions of dollars in tax penalties. Some employers chose to do nothing when it came to the law; others may think they are compliant. The opportunity for error was extensive. Brokers and employers trusted insurance companies to help them navigate the laws and choose a plan that met the requirements of the ACA.

The annual baseline budget projections by the Congressional Budget Office and Joint Committee on Taxation (CBO), is projecting employer responsibility penalties to total $228 billion over a 10-year period from 2017 to 2026. The individual mandate penalty will yield a projected $28 billion, along with high-premium employer plans (aka the Cadillac Tax) is expected to yield $18 billion.

Call me to discuss how a PEO solution can keep you in compliance and likely save you up to 20% on your current health costs.


In April 1997, I left the U.S. Department of Justice to enter an exciting new world – Professional Employer Organization (PEO) also know as Staff Leasing.  I have never been disappointed.

In 1997, the world of PEO looked very different from today, both in the players but also in the approach to interacting with clients.

Despite the growth of the industry in Texas and Florida, the birth of the PEO industry came about in California.  Initially, the industry was used by doctors to maximize their retirement savings by using “employee leasing” to separate themselves from their employees.  While the IRS forced the industry out of this model, a few companies still exist using this model –  an old employee leasing model if you will.

Twenty years ago the big players were Staff Leasing; Vincam; Administaff; Employee Soltions (ESI); Simplified Employment Services (SES); Team America; TriNet and Employer’s Resource Management.  Only the last two continue to operate under their same names 20 years later.  Vincam was purchased by ADP.  Staff Leasing became Gevity and was ultimately purchased by TriNet.  Administaff became Insperity.  The remaining three went out of business.

Twenty years ago the biggest issue facing the industry was whether the PEO was a “single employer” or a “co-employer.”  Some PEOs of the 90’s made the claim that they were the sole employer and this allowed for advantageous treatment of 401k savings for owners.  Again, the IRS came along and ruled that a PEO must do discrimination testing on a client-by-client basis.  But the view of PEO’s is that it is a co-employment relationship.

In recent years, the IRS has worked with the PEO industry to establish standards.  However, when I am meeting with business owners, I still hear the phrase “employee leasing.”  I think, “Well what does that mean to you, because over the past 20 years that phrase and the whole industry has changed.”