The Patient Protection and Affordable Care Act (PPACA) 2010 HR3590, or Affordable Care Act (ACA) for short, is the new health care reform law in America and is often called by its nick-name Obamacare.
In today’s workforce, ACA has become a trendy topic. There’s been a lot of speculation of what ACA can do for business owners and their employees. As there are as many positives to ACA, there are also as many concerns, especially when it comes to small businesses.
The Pros and Cons of ACA boil down to this: Do the costs outweigh the benefits? The average American has a lot to gain and little to lose. Those making more, including larger firms and consequently their employees, may notice negative financial effects. While some groups benefit more than others, all Americans will benefit from the new rights and protections like guaranteed coverage of pre-existing conditions and the elimination of gender discrimination.
While most big businesses have the ability to afford health insurance for their employees, smaller businesses tend to struggle. The Affordable Care Act (ACA) offers incentives, such as tax breaks and tax credits via the Small Business Health Options Program (SHOP), to small businesses with the equivalent of less than 25 full-time workers, making less than $50,000 in average annual wages, to help them provide health benefits to employees.
The ACA Employer Mandate / Employer Penalty, originally set to begin in 2014, was delayed until 2015 / 2016. ACA “employer mandate” is a requirement that all businesses with 50 or more full-time equivalent employees (FTE) provide health insurance to at least 95% of their full-time employees.
Firms with 100 or more full-time equivalent employees (FTE) will need to insure at least 70% of their full-time workers by 2015 and 95% by 2016. Small businesses with 50-99 FTE will need to start insuring full-time workers by 2016. The mandate does not apply to employers with 49 or less FTE.
If an employer doesn’t provide coverage, provides coverage that doesn’t offer minimum value, or provides coverage that is unaffordable, then they must make a per-employee, per-month “Employer Shared Responsibility Payment“. The IRS will provide the employer with a notice about the payment. Employers will not be required to include the Employer Shared Responsibility payment on any tax return that they file.
- The employer mandate is based on full-time equivalent employees, not just full-time employees.
- The fee is based on whether you offer Affordable Health Insurance to your employees that provides minimum value.
- Employers have to offer coverage to “substantially all” (95%) of their full-time employees.
- Coverage must be offered to dependents up to age 26. Once a dependent turns 26, coverage no longer needs to be offered.
- Spouses do not count as dependents; coverage does not have to be offered to spouses.
- Employers must offer coverage, but employees don’t have to take it. That being said, they can’t get marketplace subsidies if coverage meets affordability and minimum-value guidelines. Since the employee was offered qualifying coverage, the employer doesn’t owe the fee.
- Employees who work at least 30 hours per week or whose service hours equal at least 130 hours a month for more than 120 days in a year are considered full-time.
- Coverage offered to employees must be considered affordable (can’t cost more than 9.5% of employee household income) and must provide minimum value (must have an average cost sharing of 60%).
- For employers who don’t provide coverage, the fee is $2,000 per full-time employee (minus first 30 full-time employees).
- For employers who do provide coverage but don’t provide coverage meeting minimum-value and affordability requirements, the fee is the lesser of: $3,000 per full-time employee receiving subsidies, or $2,000 per full-time employee (minus the first 30).
- For plan years beginning in 2015 only, the penalty is $2,000 for each full-time employee minus the first 80 employees. For plan years beginning in 2016 and beyond, employers can exclude 30 full-time employees from the penalty calculation.
- In general, the fee is only “triggered” if at least one employee shops on the marketplace, and is eligible for a federal premium subsidy.
- The fee does not apply if a dependent shops on the marketplace and receives a subsidy. Rules only apply to employee-only coverage.
- Employers with over 200 FTE must auto-enroll full-time new-hires and provide an opt-out.
- Employers with more than 50 full-time employees who require a waiting period before an employee can enroll in health care coverage will pay $400 for any full-time employee in a 30-60 day waiting period and $600 for any full-time employee in a 60-90 day waiting period. (amounts subject to change)
- Employers must offer at least a 30 day Special Enrollment Period for those leaving plans to find other coverage. This means an employee must be covered for at least 30 days after a health plan cancellation for any reason other than non-payment.
- The fee is a per-month fee. So it’s always 1/12 of the total fee for full-time workers for each month.
- To clarify, Full-time Equivalent Employee’s (FTE) is used to determine if an employer must comply with the mandate. However, fees are based on full-time workers and not FTE.
- FTE is calculated by averaging part-time and full-time hours worked (see below for more details).
- A proposed fix to the mandate, called the Save American Workers Act, would increase the part-time requirement to 40 hours a week.
When are the deadlines?
Aggregated Large Employers (ALE’s), those with over 50 Full Time Equivalents (FTE) employees, are required to issue in January 2016 the required 1095C and 1095B statement to their eligible employees.
1095C are the equivalents of a W-2 for employee benefits. Under the Affordable Care Act, all Employers over 50 FTEs are required to issue these statements in 2016 even though companies over 50 but under 100 FTE are not required to offer health care coverage in 2015. You are still required to issue 1095C to employees and electronically file a 1094c to the IRS in January 2016, which is similar to a W-3.
For Employers with the equivalent of 50 to 99 full time employees based upon a 30 hour work week, the shared responsibility takes effect January 1, 2016. It is recommended that Employers take action now as the measurement period for full-time equivalent employees can be 3 to 12 months, with a stability period for full-time equivalents that cannot be shorter than 6 months.
All employers over 100 FTE’s were required to offer minimum valued care in 2015 and report these offerings on 1095c to employees no later than January 31, 2016.
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