ACA Compliance

aca

AFFORDABLE CARE ACT: WHAT YOU NEED TO KNOW

The Affordable Care Act (ACA), starting in 2015, large employers must offer affordable health care coverage to its full-time employees (and their dependents) that provides a minimum level of coverage or the employer must pay a penalty.  Therefore, it was important for employers to start testing their employee population (required in 2013), to determine who would be eligible to receive employer sponsored group health insurance starting in 2015.

Special ACA Resources for Employers

IMPORTANT LINK: Click here to be directed to the IRS’ Affordable Care Act Tax Provisions webpage:

Employers need to plan properly to determine their ACA staffing status, whether full or part time, to decide whether to offer employer sponsored group health insurance or let their employees obtain insurance from the Health Insurance Marketplace (Exchanges), and pay the penalty.

2015 And Beyond

Beginning in 2015, employers with 50 or more full time (or full time equivalent) employees may be subject to a penalty. This penalty may apply if you do not offer health coverage or the coverage is deemed unaffordable and does not provide minimum value.

PLEASE NOTE: On February 10, 2014, the IRS and Treasury issued final guidance on the Employer Shared Responsibility mandate. In these final rules, the mandate is delayed for a second time for certain employers. Those with 50 to 99 FTEs will now have until 2016 to comply, while employers with 100 or more FTEs will be required to comply starting in 2015. To avoid a penalty for failing to offer health insurance coverage, employers with 100 or more FTEs (who need to comply starting in 2015) need to offer coverage to 70% of their FTEs in 2015 and 95% in 2016 and beyond.

  • Full-time Employee: This is an individual who is employed at least 30 hours per week on average over the measurement period.
  • Large Employer: This is an organization that employs at least 50 full-time employees or a combination of full-time and full-time equivalent employees.  Example:  40 full-time employees employed 30 or more hours per week on average plus 20 half-time employees employed 15 hours per week on average would be the equivalent to 50 full-time employees.
  • Standard Measurement Period: This is a look-back period for ongoing employees of not less than three but not more than 12 consecutive calendar months, as chosen by the employer.
  • Stability Period: This is a period following the standard measurement period, and any applicable administrative period, of at least six consecutive calendar months that is no shorter than the standard measurement period. If the employee is determined to be full-time during the standard measurement period, then the employer must treat the employee as a full-time employee during the subsequent “stability period”, regardless of the number of hours of service during the stability period.
  • Administrative Period: This is a period-of-time following the standard measurement period and the beginning of the stability period in order to determine which ongoing employees are eligible for coverage and to notify and enroll employees. The administrative period may last up to 90 days.
  • Waiting Period: For new employees reasonably expected to work full-time, a group health plan may use a waiting period of up to 90 days before coverage becomes effective.
  • Initial Measurement Period: For new employees who are variable hour or seasonal employees, where it cannot be reasonably expected at the start date that the employee will work full-time, a period of between three and 12 months, as selected by the employer, to determine whether the employee has completed an average of 30 hours or more of service per week.  EXAMPLE:  A large employer has a calendar year group health insurance plan.  The employer chooses to use a 12-month stability period that begins January 1st and a 12-month standard measurement look-back period, covering payrolls ending in October prior to the stability period, with an administrative period between the end of the standard measurement period and the beginning of the stability period.
  • Forms 1094/1095: Effective tax year 2015, applicable large employers (employers with over 50 full-time equivalent employees based on previous calendar year) must file annual returns with the IRS and provide employees a copy of these statements (1095 employee statements).  This reporting places a heavy burden on employers as it requires monthly tracking of benefits offered to full-time employees.  Our ACA compliance package includes 1094/1095 filings and helps you avoid potential costly penalties.
  • Penalty Calculations (Effective 2015): Employers who meet the criteria of having 50 or more FTE will face penalties if they do not comply.
  • Penalty for not providing insurance to employees ($2000 per year per employee; first 30 employees are exempt from this penalty).
  • Penalty for not providing affordable or minimum essential coverage ($3000 per year per employee that qualifies for subsidy credit on health insurance exchange).
  • Medicare Tax Increase of 0.9% on Wages Exceeding $200,000 (Effective 2013)

 

Summary

Brand’s recommends employers take the following steps to begin their compliance efforts:

For Businesses With Less Than 50 FTE:

  1. Obtain Notice of Exchanges and Subsidies
  2. Determine delivery method for Notice of Exchanges and Subsidies.
  3. If health insurance offered to employees:
    1. Determine if your business qualifies for tax credits (discuss this with your accountant when filing tax returns).
    2. Understand requirements for offering insurance to all eligible employees.
    3. Determine delivery method for Summary of Benefits and Coverage.

For Businesses With 50 Or More FTE:

  1. Calculate potential penalties for non-compliance.
  2. Calculate potential costs of providing health insurance.
  3. Determine timeline for implementation of health insurance offerings if benefits are offered.
  4. Obtain Notice of Exchanges and Subsidies.
  5. Determine delivery method for Notice of Exchanges and Subsidies.
  6. Determine delivery method for Summary of Benefits and Coverage.
  7. If benefits are offered, determine best method for enrollment and submission of forms to benefits broker and insurance carrier.

For Businesses With 250 Or More W-2 Employees

  • All steps listed in step 3 above for businesses with 50 or more FTE.
  • Determine method to enter employer health care costs for reporting on W-2.