Q: Will the Affordable Care Act force fire departments to provide health insurance to their volunteers?
A: Not likely. The IRS has not addressed the issue, though it may shortly when it issues final employer rules. Even so, bipartisan legislation has been introduced to exempt such volunteers.
FULL QUESTION
Will the requirements of the Affordable Care Act force volunteer fire departments to provide health insurance to their volunteers? If so, will the vast majority of volunteer fire departments be forced to end their services?
FULL ANSWER
Our email inbox has been inundated with similar queries about the impact of the Affordable Care Act on volunteer fire departments. The furor has been fueled, in part, by a Dec. 9 story in England's Daily Mail, which carried the headline, "'A public safety disaster': Obamacare could force THOUSANDS of volunteer fire departments to close," as well as one from Fox News Insider which ran Dec. 10 under the headline, "ObamaCare May Force Thousands of Volunteer Fire Departments to Close."
The operative words in those two headlines are could and may.
Under the Affordable Care Act, businesses with more than 50 full-time workers (defined as those working an average of at least 30 hours per week) are required to provide health insurance to all of their employees or face a tax penalty of $2,000 per employee (minus the first 30 employees). That so-called employer mandate was postponed, and will now go into effect in 2015. The IRS has been mum on the issue of how the law relates to volunteers, which has gotten some volunteer fire company officials wondering whether that might mean they'd have to provide insurance to volunteers, or face a penalty.
The concern is not entirely unfounded. A longstanding IRS policy deems volunteer firefighters to be "employees" for tax purposes. That's because some volunteer firefighters receive a small stipend for things like travel or other expenses.
IRS memo, Issues for Firefighters: Generally, tax laws apply to firefighters in the same manner as for other types of workers. It does not matter whether firefighters are termed "volunteers", are considered employees, or are identified by any other name, if the work they do is subject to the will and control of the payer, under the common-law rules, they are employees for Federal tax purposes.
Whether or not volunteer firefighters would be exempt from the employer mandate under the Affordable Care Act was not addressed in the proposed rules released by the Treasury Department last year.
That prompted Heather Schafer, executive director of the National Volunteer Fire Council, to direct a letter to the acting IRS commissioner urging him to "clearly exempt volunteers from being considered 'employees' of the organizations they serve under the Employer Shared Responsibility Provisions of the law."
Schafer, Sept. 9: Depending on how/whether the final implementing regulations address the status of volunteer emergency responders, thousands of agencies could end up being penalized for not providing health insurance to their personnel.
This would be a public safety disaster. Volunteer fire and EMS agencies do not have the resources to provide their members with health insurance. Communities that rely on volunteer emergency responders are commonly rural, with small tax bases and higher-than-average rates of poverty. Most volunteer agencies raise money by serving meals at the fire station, selling raffle tickets or holding community events just to make ends meet. The cost of complying with the Employer Shared Responsibility Provision of the PPACA could exceed the operating budgets of many volunteer agencies, which mainly consist of paying insurance, fuel, electricity, training and equipment.
Volunteers do not have an expectation that they will receive health insurance benefits through the departments that they serve. Many volunteers, like approximately 60 percent of all Americans, receive employer-sponsored health insurance through their full-time jobs. Although there are some cases where volunteers have access to health insurance through their department currently, it is generally because the agency provides coverage to full- or part-time paid personnel and the volunteers are eligible to purchase their own insurance as part of the group plan. The NVFC is not aware of any instances of department paying for health insurance coverage for volunteer members at the present time.
Schafer warned that if the IRS did not spell out a clear exemption for volunteer firefighters, many fire companies "may simply take a 'better safe than sorry' approach and curtail their activities in an unnecessarily broad manner to avoid incurring penalties under the PPACA."
It's also unclear how departments would calculate hours worked to determine whether volunteers meet the 30-hour threshold to be considered full-time employees. Would it include training and maintaining the fire house or time spent on fundraising? Those questions remain unanswered.
The issues appear likely to be addressed in the soon-to-be released final IRS rules for employers. Here's what the Treasury office sent us in response to the issue:
Treasury statement, Dec. 17: We received a number of comments concerning volunteer firefighters and other volunteers in response to proposed regulations issued last December. We are taking those comments into account as we work toward issuing final regulations on the employer responsibility provision, 4980H of the Internal Revenue Code. Pending issuance of the final regulations, it would not be appropriate for us to comment on their likely content.
But even if the IRS should rule that volunteer firefighters are employees for the purposes of the ACA's employer mandate, legislation proposed by a bipartisan group of legislators is poised to reverse that.
On Dec. 10, Rep. Lou Barletta, a Republican from Pennsylvania, introduced H.R. 3685, the Protecting Volunteer Firefighters and Emergency Responders Act. The bill has 64 cosponsors from both parties. Over in the Senate, Democrat Mark Warner from Virginia proposed a similar bill, S. 1798, which also has bipartisan cosponsors. Both bills would ensure that emergency services volunteers are not counted as full-time employees under the employer mandate portion of the Affordable Care Act.
David Finger, director of government relations for the National Volunteer Fire Council, said he has not spoken to a single legislator who believes it was the intent of the Affordable Care Act to include volunteer fire companies in the ACA's employer mandate.
"We're hopeful the issue will be resolved quickly," preferably in the final IRS rules, Finger told us in a phone interview. But he fears that if the issue isn't resolved in the next few months, some volunteer fire companies — in an abundance of caution — may take measures to ensure they are not hit by the employer mandate. That might include reducing the number of volunteers or limiting the hours of some volunteers under 30 hours to assure they do not meet the "large" business threshold. But Finger said he has a "strong feeling," based on the bipartisan agreement he has heard on the issue, that it will be resolved before any precautionary actions by volunteer companies are necessary.
As for the headlines that warn "thousands" of volunteer fire companies could or may close, Finger believes that's highly unlikely even if the rule doesn't break their way. Many companies would be exempt simply because they do not have 50 full-time volunteers, and even the ones that do would likely take "steps to protect themselves" — such as limiting the number of volunteers or the number of hours they work — long before they'd actually close, he said.
Of the more than 30,000 fire departments in the U.S., just over 20,000 are all volunteer, and another 5,445 are mostly volunteer, according to council estimates. All told, the council estimates, there were more than 783,000 volunteer firefighters in the U.S. in 2012.
– Robert Farley
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