PPACA Summary of Important Health Insurance Provisions Affecting Employers
Large Employer Requirements
PPACA imposes a penalty on large employers that do not offer “Minimum Essential Coverage” to substantially all full-time employees and their dependents. Large employers that offer coverage may still be liable for a penalty if the coverage is “unaffordable” or does not provide the “required minimum value”. These penalties are assessed against the employer on a monthly basis and can be as much as $2,000 to $3,000 per employee per year.
Although the law provides that the penalty was in effect January 2014, the IRS has delayed enforcement of the penalties until January 2015. Furthermore, the IRS has provided transition relief which will allow eligible employers to avoid the penalties until 2016.
Who is affected?
The law focuses on “Large Employers” which is defined as employers that employ the equivalent of 50 Full Time employees on average each month during the prior year. This calculation includes both employees that work an average of 30 hours or more each week (or 130 hours per month) plus the calculated amount of Full Time Equivalents (FTEs). Use the calculator worksheet below to calculate Full Time Equivalents.
To determine who is a Large Employer for 2015, employers will be judged based on the hours worked by employees during 2014. Although normally employers are judged by the entire prior year, 2014 has a provision allowing the employers to select a period including a minimum of six months to determine the average number of employees employed each month.
Related entities may have to be grouped together for the calculation.
What if You are a Large Employer?
As mentioned above, Large Employers have a requirement to provide affordable health insurance (under specific technical definitions provided by the law and regulations) to their full time employees. If the employer fails to comply, they are subject to penalties of up to $3,000 per employee.
Large Employers also have reporting requirements to demonstrate their compliance with PPACA. All providers of health insurance will be required to file reports to assist the government with the administration of the Individual Mandate (Penalties will assessed against individuals for not obtaining required insurance coverage). Although the reporting will not likely be required to be filed until January 2016, it is important to be prepared (and have systems in place) to gather the data beginning in 2014 and 2015 to complete the reports.
How can You Determine if You Are a Large Employer?
Although some employers will obviously be over the 50 Full Time employee threshold, for employers that are close or who employ a large number of part-time employees or are considering using part-time employees to replace full-time employees to mitigate the effect of this new law, we have provided a calculator on our website to help you determine your status as a large employer for 2014 and later years.
What if You Are Not a Large Employer?
You organization is not subject to the provisions that require offering health insurance to your employees. If you do offer it to employees you may be entitled to limited tax credits. Although you may not be subject to large employer shared responsibility requirements, there may be other PPACA requirements you need to follow, such as the required employee notification on health insurance.
The PPACA is a large complicated piece of legislation with thousands of pages, and will have a dramatic effect on businesses and organizations beyond the provisions discussed in this communication. The IRS is continually issuing and revising guidance as the implementation dates approach and various government agencies are scrambling to implement the Health Insurance Exchange provisions. It is important to keep abreast of the changes that will affect your business.
To determine the financial impact on your organization, please contact a member of our Affordable Care Act team or your AFT relationship contact today.
|Affordable Care Act Team||(304)346-0441||1(800)642-3601||or email firstname.lastname@example.org|
|Bill H. Phillips, CPAemail@example.com|
|J. Marlin Witt, CPA, CFP®||firstname.lastname@example.org|
|Tessa White Carr, CPA, MBAemail@example.com|
This is a constantly evolving area affecting employers of all sizes. While we strive to provide updated accurate information, this is not a substitute for actual tax advice. Due to the general nature of this communication, it is not legal or tax advice. Please consult your tax advisor regarding your individual situation prior to acting on any information shown on our website and in any related materials.