As President Donald Trump’s administration begins its work, rumors that most or all of the Affordable Care Act (ACA) could be repealed are plentiful. Over the next few months, the future of the law should be known. However, the ACA remains in place for 2017 and employers should move forward accordingly.
Currently in effect under the ACA, business owners with 50 or more employees who are either full-time (FT) or full-time equivalent (FTE) are required to offer health insurance coverage to their FT employees. FTEs are determined by dividing the total hours of all part-time employees worked in one month by 120. Seasonal employees are not included in this calculation.
While the test to determine coverage requirements is based upon calculating the number of both FT and FTE employees, employers are only required to provide health insurance to those employees who work 30 or more hours per week. In order to maintain compliance, health insurance coverage must pass these two tests.
Employers with 50 or more FT and FTE employees, who wait for the new administration’s plans for health insurance, may be underestimating the impact of potential penalties for not offering health insurance to all eligible employees. Employers who fail to offer appropriate coverage could face a penalty of $2,000 per year for each full-time employee, reduced by 30 if one or more FTs receive assistance from a Health Insurance Marketplace offered by the federal or state government.
The ACA is still law despite its uncertain future. Compliance is especially critical for employers in the restaurant, hotel, and manufacturing industries where large workforces are common. Business owners should continually evaluate their FTE employees and the cost to provide health insurance coverage to those eligible against the potential noncompliance penalties.
Look for future posts on how changes to the ACA will affect businesses. For individual questions or more information on how the ACA influences a restaurant, hotel, or companies that serve the hospitality industry, contact Aaron M. Boker at 240.364.2582 or firstname.lastname@example.org.
One of the fundamental goals of the Affordable Care Act “ACA” is health coverage for all. With that goal comes new reporting requirements for employers and insurance companies offering health coverage. The IRS recently released drafts of the forms that will be used to report 2015 coverage information in early 2016.
Employers with more than 50 full-time equivalent employees will be required to use Form 1095-C to report whether or not they offered health coverage to their employees. The Form 1095-C that employees receive from their employer will include information on the months the employee was offered coverage and the employee’s share of the lowest cost monthly premium for self-only “minimum value” coverage. The employer will transmit the Form 1095-Cs, via Form 1094-C, to the IRS.
Regardless of their size, employers that sponsor self-insured health plans and insurers are required to report on the individuals covered by their health plans. Form 1095-B will be provided to all primary insureds to show the months the primary insured and his or her family members had coverage under the plan. The plan sponsor/insurance company will transmit the forms to the IRS via Form 1094-B.
These reporting requirements are designed so that the IRS can monitor several key features of the ACA: compliance with the individual and employer mandates as well as eligibility for the premium tax credits associated with purchasing coverage through an exchange.
While these new requirements are not effective until the end of 2015, employers should begin to make sure systems and procedures will be modified in time to ensure compliance.
Please contact Mark Flanagan of Aronson’s compensation and benefits practice at 301.231.6257 to further discuss the impact of this requirement under the new healthcare reform rules.
About the Author: Mark Flanagan is a director in Aronson’s Specialty Tax Group. He has over 25 years of experience in the compliance and technical aspects of qualified and non-qualified benefit plans, including plan design, consulting, and technical administration
As companies continue to look for the most cost effective ways to provide health insurance to their employees, they may be tempted to reimburse the employees for coverage obtained outside of the business. Even before the ACA, it was not uncommon for employers to reimburse tax-free some or all of the premiums employees incurred to acquire their own health insurance.
However, under the ACA, such reimbursements constitute a group health plan. As such, the employee reimbursement arrangement will cause the business to be subject to a $100 per day per employee penalty. This applies to any business, no matter how small.
This rule was designed to discourage a company from telling its employees to go to the government’s Health Insurance Marketplace to get a policy, possibly subsidized on the backs of taxpayers, and reimburse for that lower premium amount instead of the company obtaining group insurance on its own.
This penalty will not apply if the reimbursement is added to the employee’s W-2 (i.e., not tax-free to the employee). Thus, businesses can still offer these reimbursement arrangements, but such reimbursements will need to be treated as wages, replete with all associated withholdings and employment taxes.
For further information or to discuss your specific situation, please contact your Aronson tax advisor at 301.231.6200.
As small businesses work to keep up with the evolving state of healthcare in the U.S., recent tax changes may be a double-edged sword for employers. The good news is that the available tax credit, for plan years beginning after December 31, 2013, has increased from 35 percent up to 50 percent of premiums paid by small business employers. The bad news is that, to be eligible, plans must be offered through a Small Business Health Options Program Marketplace (i.e., through healthcare.gov or a state-run marketplace). A second new limitation is that the credit may only be taken for two consecutive years.
Other eligibility requirements remain the same. To qualify:
For small employers who qualify, the credit can be a significant tax savings. For “flow-through” businesses, like a small medical practice partnership, the credit would flow through to the individual owners’ tax returns.
If the credit exceeds the 2014 tax liability, it may be carried back to a prior year for a refund or carried forward to reduce next year’s taxes. For employers who missed the credit in 2012 or 2013, a quick calculation may help determine if amending a prior year return to claim the credit would be worthwhile.
For more information, please contact your Aronson tax advisor or Ellen Boulle-Lauria of Aronson’s Professional Services Industry Group at 301.231.6200.
As part of the new final regulations under the Affordable Care Act, the IRS announced a second delay in the “shared-responsibility” requirement for employers with 50 to 99 full-time equivalent employees (FTEs). Employers of this size can now wait until 2016 to offer health care coverage to their employees before being subject to the shared-responsibility payments if they chose not to provide coverage. In order to be eligible for the delay, employers cannot reduce their workforce or reduce the number of hours of service required to be eligible for coverage. Additionally, employers must maintain their previous coverage.
These employers are still required to meet the reporting requirements for their employees’ healthcare coverage starting in 2015.
The regulations also provide some shared-responsibility penalty relief for employers with 100 or more full-time equivalent employees. In 2015, in order to avoid the shared-responsibility penalty, 70% of full-time workers must be offered minimum essential coverage. Prior to the new regulations the percentage was 95%. In 2016 and beyond, 95% coverage will be required to avoid the penalty.
Employers and employees alike should pay close attention as additional guidance and regulations are likely to continue to be released on the Affordable Care Act.
If you should have any questions, please contact Mark Flanagan of Aronson LLC’s Specialty Tax Group at 301.231.6257.