Affordable Care Act FAQS

flummoxed-guyACA Compliance in the Coming Years

The Affordable Care Act is not just a tax reporting requirement that carries stiff penalties for failure to comply, it has overlap implications as a Human Resources compliance mandate. Knowing what, when, and how to report is critical. OmegaComp HR has distilled important information and put together this FAQ page to assist our clients with an overview of the changes that are coming.

In the coming months, OmegaComp HR will be introducing our new payroll reporting technology: ACA OnDemand. This new software will ease the tracking and reporting requirements for employers. This page isn’t going to focus on that software, we will have more coming on that in the near future. For now, OmegaComp HR is posting this information to help our clients get their heads around the changes coming 2016 and beyond.

Question: Is my business big enough to worry about these legislative changes?

Answer: ACA Reporting legislation affects all employers-regardless of size.

This may be in contradiction to what you have read so far. The fact is, all employers are affected by at least one mandate, regardless of the number of employees. Besides the more easily understood definition of a full time or full time equivalent employee, there are other types of employees to consider: employers who use seasonal workers, volunteers, high turn over industries, health care workers, and the less understood excise tax for employers of any size that carries penalties for failure to comply. See our penalties flow chart for 2015 and 2016. Recent press has focused on Applicable Large Employers and Shared Responsibility, which pertains to any employer with 50+ full time employees. These employers will have the bulk of the heavy lifting to do when it comes time to report.

The following guidelines are used to determine if you are an Applicable Large Employer or ALE. ALE(s) are subject to certain penalties and reporting requirements outlined in the law, such as the Shared Responsibility Requirement.

For 2015 and after, employers employing a minimum of a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code.

To calculate whether you have enough full time employees to be considered an Applicable Large Employer, use the following formula:

  • Full-Time employees–which is any employee that works a minimum of 30 hours per week, PLUS
  • Full-Time Equivalent employees* which is determined by adding the total number of hours worked in a month by part time workers, divided by 120.
  • Add number of Full-Timers to Full Time Equivalent employees, minus the number of owners/partners and that equals the number of FTEs
  • More than 50 means you are a Applicable Large Employer and the law applies to you.
Example of a calculating the total full time employee count:
Each W2 is equal to one employee.A company determines it has 30 full-time employees (paid for 30 or more hours per week), and 30 employees who are not full-time (paid for an average of 20 hours per week).In the month of November, the employer adds up the hours of the 30 employees who are not full-time (working 20 hours per week for four weeks) and gets 2,400 hours. 20 hours per week times 4 weeks = 80 hours. 80 times 30 = 2,400 total hours worked in a month.To calculate Full Time Equivalent, do the following:The calculation is: total hours 2,400 hours divided by 120, + 30 full-time employees = Number of FTEs for the month of November.In this example 2,400 divided by 120 equals 20.20 (FTE) + 30 (FT) = 50 full time employees.

CalChoice’s website has posted an online calculator. Click here to try it.

An Applicable Large Employer must:

  • Track hours worked monthly and be prepared to provide documented proof of worked hours at reporting time
  • Submit annual reports to the IRS.
Business   ACA Requirements
1-50*
  • Employer with 25 or fewer FTEs may be eligible for the Small Business Health Care Tax Credit. The calculation for eligibility is slightly different: Count all hours worked for each employee (up to 2,080 hours per employee) and divide by 2,080.
  • When employer-sponsored health coverage is offered in the small-group market, these plans are required to offer essential health benefits and meet actuarial value requirements.
  • Beginning Oct. 1, 2013, employers with 50 or fewer FTEs became eligible to purchase health insurance for employees through the government marketplace, the Small Business Health Options Program (SHOP).
  • Employers with 100 or fewer full-time (30 hours per week) employees may be eligible for SIMPLE cafeteria plans.
  • Employers with 50 or fewer employees (the actual number of full-time and part-time employees) are considered small employers.
50*-100
  • Employers with 50 or more FTEs may be subject to Shared Responsibility penalties if they do not offer coverage to all full-time (30 hours per week) employees and their dependents that meet affordability and minimum value requirements.

Starting in 2015 businesses with 100 or more full-time equivalent employees need to provide affordable, minimum value health care coverage to 70 percent of all its full-time employees and their dependents, unless the employer qualifies for 2015 dependent coverage transition relief, or face a penalty.

In 2016, the 70 percent threshold is increased to 95 percent, and the shared responsibility penalties will also apply to employers with 50 or more full-time equivalent employees.

  • Employers with 100 or fewer full-time (30 hours per week) employees may be eligible for SIMPLE cafeteria plans
  • Starting January 1, 2016, employers with 51 to 100 employees (the actual number of full and part-time) will be considered a small employer. This means these employers may be eligible to purchase health insurance for employees through the government marketplace, the Small Business Health Options Program (SHOP).

*Please note that some portions overlap for employers with 50 full-time equivalent employees, and therefore they fall into two separate categories.

100+ FTEs
  • Employers with 50 or more FTEs may be subject to shared responsibility penalties if they do not offer coverage to all full-time (30 hours per week) employees and their dependents that meet affordability and minimum value requirements.

Starting in 2015 businesses with 100 or more full-time equivalent employees need to provide affordable, minimum value health care coverage to 70 percent of all its full-time employees and their dependents, unless the employer qualifies for 2015 dependent coverage transition relief, or face a penalty.

In 2016, the 70 percent threshold is increased to 95 percent, and the shared responsibility penalties will also apply to employers with 50 or more full-time equivalent employees.

  • Employers who file 250 or more W-2s in the previous year must report the total aggregate cost of major medical health benefits and certain pre-tax funded supplemental health coverage provided to each employee starting with their 2012 W-2 Forms. Reporting is optional for employers who file fewer than 250 W-2s until further guidance is issued by the IRS.
  • Employers with 100 or more FTEs may be eligible to participate in the government marketplace, the Small Business Health Options Program (SHOP), after Jan. 1, 2017 at the option of each state.
All Employers – Regardless of Size

What if my business was not in existence before 2015?

Answer: your requirements are yet to be determined.

While in most circumstances, reporting for the ACA determines requirements using the “look back” method, new businesses are subject to projecting workplace capacity.

“An employer that was not in existence on any business day in the prior calendar year is considered an applicable large employer in the current year if the employer is reasonably expected to employ an average of at least 50 full-time employees (including full-time equivalents) on business days during the current calendar year and it actually employs an average of at least 50 full-time employees (including full-time equivalents) on business days during the calendar year. In contrast, for the next year (the year after the first year the employer was in existence), the employer will determine its status as an applicable large employer using the rules that generally apply.”

Still confused?
Contact one of our Business Solutions Advisors for assistance: 888.540.0752

Question: How can I measure the affordability of my health plans coverage without knowing my employees’ total household income?

Answer:  An affordable plan is one whose employee contribution for single-only coverage does not exceed 9.5% of an employee’s household income.

However, since most employers do not know their employees’ total household income, IRS guidance states that they may use the employee’s annualized or W-2 wages instead.

IRS.gov defines ‘Affordable coverage”: If the lowest cost self-only only health plan is 9.5% or less of your full-time employee’s household income then the coverage is considered affordable.Minimum essential coverage: For purposes of reporting by applicable large employers, minimum essential coverage means coverage under an employer-sponsored plan. It does not include fixed indemnity coverage, life insurance or dental or vision coverage.Minimum value coverage: An employer-sponsored plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan.

Question: How often do I have to review who is eligible for coverage?

Answer: Using the “Look-Back” measurement period.

A measurement period is the period of time over which an employee’s eligibility for health coverage is measured, typically measured in a 12 month cycle.

Example: An employer may choose a measurement period of 12 months (December 1, 2013—November 30, 2014) and a stability period of 12 months, beginning on January 1, 2015, leaving the requisite 30-day administrative period to review and make decisions.During that time, the employer “looks back” over the previous 12 months to determine which employees qualify for coverage—in other words, which employees averaged 30 hours or more. The employer then offers them coverage for the stability period in 2014.In theory, the employer will only have to evaluate eligibility once a year, though they can do it more frequently.For a new hire, their measurement period starts when they begin working and can stretch a full 12 months, after which the employer must evaluate her hours worked during the measurement period and decide whether she gets offered coverage for the next stability period.It’s important to note that, once the stability period starts, employers cannot deny eligible employees health benefits should their hours drop below 30 hours a week. Employers have to wait until the end of the current stability period to re-evaluate this.

Question: How do I determine which employees are included? What about seasonal employees, volunteers, or independent contractors?

Answer: Understand your ACA Risk. It may be in your best interest to contact OmegeComp HR to schedule an ACA Risk Assessment and decide if our new technology ACA OnDemand is something that would benefit you. Your ACA Risk Assessment will contain a review of the following:

  • Full Time and Full Time Equivalent Employee Count
  • Part-Time/Volunteer/Seasonal Employee Count
  • Number of Turn Over and the Impact on Your Total
  • Control Group

Workers who must be included in these considerations are those who qualify as an employee under the common-law test. The common-law test helps to determine the degree of control and independence of the employee. Businesses must look at the entire relationship, consider the degree of control and document each of the factors used in coming up with the determination. Any worker who meets this common-law test must be considered in health care reform provisions.

Employee Categories that are Exempt:

  • Volunteers: Hours contributed by bona fide volunteers for a government or tax-exempt entity, such as volunteer firefighters and emergency responders, will not cause them to be considered full-time employees.
  • Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed or operating on a limited schedule during the summer.
  • Seasonal employees: Those in positions for which the customary annual employment is six months or less generally will not be considered full time employees.
  • Student work-study programs: Service performed by students under federal or state-sponsored work-study programs will not be counted in determining whether they are full-time employees.
  • Adjunct faculty:  Employers of adjunct faculty are to use a method of crediting hours of service for those employees that is reasonable in the circumstances and consistent with the employer responsibility provisions. However, the final regulations expressly allow crediting an adjunct faculty member with 2 ¼ hours of service per week for each hour of teaching or classroom time as a reasonable method for this purpose.

Question: If two or more companies have a common owner or are otherwise related, are they combined for purposes of determining whether they employ enough employees to be subject to the Employer Shared Responsibility provisions?

Answer: Yes

Section 4980H includes a longstanding provision that also applies for other tax and employee benefit purposes, under which companies that have a common owner or are otherwise related generally are combined and treated as a single employer, and so would be combined for purposes of determining whether or not they collectively employ at least 50 full-time employees (including full-time equivalents).

Still confused?
Contact one of our Business Solutions Advisors for assistance: 888.540.0752

ACA Reporting

Form 1095-C

  • Provide to full-time employees to use when filing their tax returns.
  • File with the IRS as an information return.
  • Reports information about health insurance coverage offered and any safe harbors or other relief available to the employer, or reports that no offer of coverage was made.
  • Reports enrollment information from employers who offer self-insured plans and information about employees and individuals who enrolled in minimum essential coverage.
  • Helps the IRS determine if your organization potentially owes an employer shared responsibility payment to the IRS.
  • Helps the IRS determine whether your full-time employees and their dependents are eligible for the premium tax credit.

What you’ll need for Form 1095-C 

  • Who is a full-time employee for each month.
  • Identifying information for employer and employee such as name and address
  • Information about the health coverage offered by month, if any.
  • The employees share of the monthly premium for lowest-cost self-only minimum value coverage.
  • Months the employee was enrolled in your coverage.
  • Months the employer met an affordability safe harbor with respect to an employee and whether other relief applies for an employee for a month.
  • If the employer offers a self-insured plan, information about the covered individuals enrolled in the plan, by month.

Form 1094-C

  • File with the IRS as a transmittal document for Forms 1095-C, Employer Provided Health Insurance Offer and Coverage.
  • Provides a summary to the IRS of aggregate employer-level data.
  • Helps the IRS determine whether an employer is subject to an employer shared responsibility payment and the proposed payment amount.

What you’ll need for Form 1094-C 

  • Identifying information for your organization.
  • Information about whether you offered coverage to 70% of your full-time employees and their dependents in 2015. (After 2015 this threshold changes to 95%.)
  • For the authoritative transmittal
    • Total number of Forms 1095-C you issued to employees.
    • Information about members of the aggregated applicable large employer group, if any.
    • Full-time employee counts by month.
    • Total employee counts by month.
    • Whether you are eligible for certain transition relief.
    • You may be required to report the value of the health insurance coverage you provided to each employee on his or her Form W-2.

This content is for informational purposes only and should not be considered legal advice.

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