Creative job pay under obamacare

So I mentioned in another post about my clients age 60 and the huge increase in healthcare costs under obamacare. So here is how this all has worked out which I think you will find interesting.

Background: Couple age 60, he works for a small business of 6 employees and makes $70,000/year. She has RA and does not work. Their medical premiums will jump substantially with a higher deductible and max out of pocket. His current salary is just above the limits so he is ineligible for a subsidy.

So he did some number crunching and found out that if he took a $10,000/year pay (pre-tax) cut he would get a subsidy saving him $11,808 (post-tax) in premium costs. Next he calculated the lower tax bill by earning less and he actually had more than $4000 in additional money in his pocket after taxes and medical premiums.

So he went to his boss with this offer. He cuts his pay by $10,000 saving the employer $11,000 when you add the employer share of FICA/SS taxes and workers comp insurance costs. In exchange he wanted this in return:

1. Car leased under a commercial contract which paid for the car, gas and insurance. Cost $6000/year.

2. $500/employee contribution to the Flexible Spending Account for all 6 employees. $500 is the max an employer can contribute and contributions cannot be discriminatory, hence his offer for all employees. Cost $3000/year.

3. Employer paid for his cell phone. His job is unique so a carve out to pay his cellphone was not discriminatory. Cost $540/year.

So the employee gets $4000 more after tax & healthcare cost take home money plus a car + a cell phone. The employer saves $1100/year plus looks like a hero because he coughs up $500 for each employee in their Flex account. The employer jumped at it.

Really dumb that it should come to this but no matter what the rules are, people will find a way to game the system.



Edited by Stuartap 2013-12-14 6:52 PM