Attorney: Transferred workers might be better off than at IU

  • Sept. 26, 2013

By Jon Blau

As an employee benefits attorney and an Indiana University alum, Kelly Kuglitsch, like many people, had a visceral reaction to news that employees at IU had been laid off and would be rehired by a temp agency.

It was a relatively small group of employees, 50 in a department of 650, and IU had other incentives to make the switch, but it fit employer trends nationwide to limit potential obligations to provide health insurance under the Affordable Care Act.

On the other hand, Kuglitsch, employee benefits counsel with the Milwaukee firm of Davis and Kuelthau, said there could be an upside for these workers as “Obamacare” moves forward.

IU was not planning on offering hourly employees health insurance. And, depending on how many hours these 50 workers receive with the Manpower agency and the affordability of that plan, they may not get benefits there, either. But the opening of health care exchanges Oct. 1 will soon offer people without workplace coverage the chance to purchase insurance with a subsidy.

Americans have been focused on getting health insurance from their employers for years, Kuglitsch said, but once the Affordable Care Act is fully implemented, the pendulum could swing and the exchanges could bring rates that are more affordable to people who can’t find full-time employment.

IU may not want to offer insurance to hourly employees and expand its $215 million health care budget, but the exchange could offer a remedy. The law specifies that workers who are not offered plans with a specific range of coverage at a rate less than 9.5 percent of the employee’s income will be able to buy health insurance for lower rates on the exchange.

“It sounds terrible that IU isn’t offering health insurance to these people,” Kuglitsch said, “but this may end up being better for them.”

The 50 Manpower employees who will contract with IU will be offered a benefits plan, as well as the ability to contribute to a 401(k) retirement savings plan, according to Manpower spokeswoman Mary Ann Laskey. They will also receive short-term disability benefits and have access to 4,000 online course through Manpower’s Training and Development Center.

Laskey did not comment, however, on specifics of the medical plan because it’s considered proprietary information.

Watching employment trends during the law’s first wave, Kuglitsch does fear that temp agencies across the country might choose to incur fines per employee rather than insuring their workforce; the fine is $2,000 per employee if they insure none of their employees, $3,000 per uninsured employee if they offer health insurance to some employees and not others. Temp workers can also be kept under 29 hours, a phenomenon she said has become more common in the restaurant and retail industries and has happened on a smaller scale at IU.

Agencies like Manpower are also attractive to some employers, Kuglitsch said, because they can offer a larger pool of workers to choose from, each accruing 29 hours a week. Kuglitsch said she expects more guidance from the government concerning temp agencies, because the Internal Revenue Service may consider some reorganizations that feature temp agencies a “sham” and consider the temp employee’s main work site its true employer.

One scheme the IRS already anticipates is where a temp workers spends 29 hours with one employer and has a separate arrangement, outside of the temp agency, to collect more hours with the same company.

“The IRS is good at collecting revenue when it wants it,” Kuglitsch said.

IU spokesman Mark Land reiterated that the move to Manpower for 50 employees at the university is not a “test,” and there are no further plans to contract employees from temp agencies. About 10,000 part-time workers are employed at IU during the course of a year. But Land said, in the end, the number of employees who have and will actually see their hours reduced as the law unfolds should be a significantly smaller portion of that group.

Land said he does not have more specific numbers on the total number of hourly employees who have seen or could see their hours cut back to 29 hours, but Dan Rives, the university’s head of human resources, is scheduled to provide more specifics on the Affordable Care Act’s effects on IU during an October Board of Trustees meeting.

 Editor's note: This story from The Bloomington Herald-Times is being published here as a courtesy for readers of IU in the News.