The Affordable Care Act (ACA) is often known as “Obamacare,” a term which has been embraced by President Barack Obama himself. Over the past several years, the largest employers have become accustomed to complying with the ACA, but starting in 2016, smaller employers (those with 50 or more full-time workers) will also need to offer coverage and file reports with the IRS.
A great deal of information about the ACA exists, but it can be confusing. To clear things up, here’s an overview of what your business needs to know about Obamacare:
- The ACA Employer Mandate states that all businesses with 50 or more full-time-equivalent (FTE) employees must provide health insurance to at least 95% of their workers and their dependents up to age 26 (spouses are not considered dependents), or pay a fee.
- Firms with 100 or more FTEs must cover 95% of their full-time workers by 2016, as well. Currently, they are required to cover only 70%.
- Employers with 49 or fewer FTEs are not required to provide insurance coverage. However, those with fewer than 25 FTEs with average annual salaries under $50,000 qualify for tax credits.
- Firms with fewer than 10 FTEs with average annual wages under $20,000 can qualify for a 50% credit of their share of the premiums.
- If you offer insurance, you must offer it to all eligible employees within 90 days of their start date.
- Full-time-equivalent employees are defined as those who work at least 30 hours per week, or whose hours equal at least 130 hours per month for more than 120 days per year.
- The ACA also created incentives for employers to create healthier workplaces through wellness programs and activities, with a maximum reward of 30% of the cost of coverage. The reward for programs that help prevent or reduce tobacco use has increased to 50%.
In addition to the basics above, it’s important to know about compliance requirements under the ACA, such as:
1. Exchange Notice
As of October 2013, employers of all sizes are required to provide employees a notice of the availability of healthcare coverage through public health insurance exchanges. This is typically done within two weeks of hiring new employees.
Notices must be in writing, and must inform employees:
- About the Health Insurance Marketplace.
- That the employee may be able to secure lower-cost private insurance through the Marketplace, and they may be eligible for a premium tax credit if the employer’s plan does not meet certain requirements.
- That if they elect to purchase coverage through the Marketplace, they could lose the employer contribution to the health care.
Employers must provide the notices to all full-time and part-time employees, whether or not they provide a healthcare plan.
2. Annual Health Care Reporting
Starting in 2016 for the year 2015, all self-insured employers must file an annual return with the IRS for individuals they cover.
Large employers (over 50 FTEs) must also file an annual return. In addition, they must provide statements to their full-time employees about the insurance coverage offered. Employers need to track information each month in 2015, and be ready to report on new Forms 1095-C and 1094-C in 2016.
The ACA also requires employers to report the cost of health insurance coverage provided to each employee on his or her Form W-2. Reporting this cost does not mean it’s taxable – rather, it’s meant to simply provide information to the employee. There is no requirement to include this amount on the employer’s Form W-3.
[pullquote align=”right” cite=”” link=”” color=”” class=”” size=””]Businesses with fewer than 50 FTEs are not required to offer health insurance, and do not face tax penalties or fees if they choose not to offer their employees health insurance.[/pullquote]
3. Penalties
Businesses with fewer than 50 FTEs are not required to offer health insurance, and do not face tax penalties or fees if they choose not to offer their employees health insurance. Businesses with at least 50 FTEs must offer coverage to its workers. If not, the employer must pay a penalty.
4. Employer Shared Responsibility Provisions
Large employers are subject to a penalty if they do not provide affordable coverage. This applies if any employees have to pay more than 9.5% of their family income for their share of the employer-provided coverage, and elect to purchase on the Marketplace and receive a tax credit. The current penalty is $3,000 per full-time employee per year, with a maximum penalty equal to $2,000 times the number of full-time employees, minus 30. Employees with fewer than 50 FTEs are not subject to this provision.
5. Credits
Employers may be eligible for tax credits if they purchase coverage through the Small Business Health options Program, cover at least 50% of employee’s costs and have fewer than 25 FTEs with average annual wages under $50,000.
6. Summary of Benefits and Coverage
Employers must explain coverage to employees through a Summary of Benefits and Coverage (SBC) form. This form outlines what the plan costs and what it covers, and answers basic questions on deductibles, out-of-pocket limits, emergencies, prescription drug coverage and other plan-related items. Employers who do not provide SBC forms face possible penalties.
Employers who need more details, answers or help regarding the ACA can go to www.healthcare.gov or www.irs.gov.
