BASICS ON EMPLOYER SHARED RESPONSIBILITY PROVISIONS
OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT
Since the passage of the Patient Protection and Affordable Care Act (“ACA”), many employers have been curious about how various provisions of the ACA will affect their businesses. Notably, the Employer Shared Responsibility provisions of the ACA, or the “Employer Mandate,” will soon become effective. The Employer Mandate provisions will generally apply to employers with 100 or more full-time employees and FTE’s beginning in 2015, and employers with 50 or more full-time employees and FTE’s beginning in 2016. Employers that are subject to these provisions must offer full-time employees (70% in 2015 and 95% in 2016) affordable health coverage that provides minimum value or they may be subject to an Employer Mandate payment.
A “full-time employee” is an employee who is employed on average at least 30 hours of service per week or works 130 hours in a calendar month.
Coverage is considered affordable if the employee’s required contribution does not exceed 9.5% (Adjusted to 9.56% for 2015) of the employee’s household income. The Rules and Regulations recognize that an employer will likely not know an employee’s household income; therefore, meeting any of the three optional safe harbors will suffice. The safe harbors include the following: (1) Form W-2 safe harbor; (2) rate of pay safe harbor; and (3) federal poverty line safe harbor. The Rules and Regulations provide specific details on each safe harbor.
The Employer Mandate provisions require that health coverage provide minimum value. The coverage provides minimum value if it covers at least 60% of the total allowed cost of benefits that are expected under the plan. A minimum value calculator, published by the Centers for Medicare & Medicaid Services, can be found at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/.
Pay or Play.
Employers who fail to comply with the Employer Mandate requirements and have at least one full-time employee who enrolls in a health insurance exchange and receives a premium tax credit or cost-sharing reduction will be subject to a penalty of $2,000 multiplied by the total full-time employees (minus 80 in 2015 and 30, thereafter). For employers who offer health coverage that is not affordable or of minimum value and have at least one full-time employee who enrolls in a health insurance exchange and receives a premium tax credit or cost-sharing reduction, the employer is subject to a fine of $3,000 multiplied by the number of employees in the exchange receiving a premium credit or cost-sharing reduction. Transition relief for 2015 may be available to some employers under certain circumstances.
For 2015 (reported in 2016), employers must submit IRS forms 1094-B and 1095-B for Individual Mandate reporting and IRS forms 1094-C and 1095-C for pay or play reporting.
Note that this post is only a brief summary of the Employer Shared Responsibility provisions under the ACA, it does not constitute legal advice nor does it establish an attorney/client relationship. Should you have specific questions regarding the above or the ACA, please contact Bonnie Coleman, Laura Frost, or Preston Sisler at Hodges and Davis.
Hodges and Davis, P.C. - November 2014