Wondering how the Obamacare / Affordable Care Act will influence your business in 2014? If you have more than 50 employees, you need to read the following.
Note: It is a possibility that reading stuff like this will make your eyes roll to the back of your head or induce serious drowsiness.
In fact, I think I’m required to recommend that you not drive or operate heavy machinery while reading the following. Then again, probably not a good idea to do that stuff whilst reading anything.
Without further ado, here’s a brief discussion of the penalties and such you could be looking at. (Whether or not the penalties are more costly than the health coverage is a question that will be worthy of serious consideration):
For plan years beginning on or after January 1, 2014, the shared responsibility provisions will apply to all employers with at least 50 full-time or full-time equivalent employees. At that time, employers must offer coverage that is affordable and meets the minimum value requirements to 95 percent of their full-time employees and those employees’ eligible dependents. If any of their full-time employees receives premium assistance (a tax credit or cost sharing reduction) through an exchange, the employer must pay a penalty. Employers with 50 full-time or equivalent employees are generally not subject to the shared responsibility provisions.
What is affordability and minimum value?
To avoid a tax penalty, an employer’s coverage must mee the ACA’s standards for being both affordable and providing minimum value. Coverage will be considered affordable if the employee’s share for the cost of coverage does not exceed 9.5 percent of household income.
There are three safe harbors (Rate of Pay, Poverty Line, Form W-2) that employers can use to determine affordability if household income cannot be determined by the employer. If multiple healthcare coverage options are offered, the affordability test is applied to the lowest-cost option (among qualified options). Dependents’ coverage cost does not factor into the affordability determination. Note: Employers are not required to cover spouses.
Minimum value means a healthcare plan covers at least 60 percent of the total allowed cost of benefits expected to be incurred under the plan.
What are the employer penalties?
There are two potential penalties for non-compliance of shared responsibility requirements.
Penalty #1: An applicable large employer who does not offer affordable, minimum value coverage to 95 percent of its employees may be penalized $2,000 annually for every full-time employee, minus the first 30, if any employee receives premium assistance through the public exchange.
Penalty #2: An applicable large employer who offers a plan thatis either not affordable or does not meet theminimum value will be subject to a penalty if anyemployee receives premium assistance through thepublic exchange. The penalty is equal to $3,000 foreach employee who receives premium assistance.Employers will not be liable for penalties until thefirst plan year on or after January 1, 2014 (called“transition relief”). To be eligible, an employer musthave used the non-calendar fiscal year plan on orbefore December 27, 2012.Transitional relief is also granted to an employer who hasnot offered dependent child coverage, as long as theemployer takes steps to add this coverage during the planyear beginning in 2014.