Through my conversations with employers, it is evident that many have questions about the Affordable Care Act (ACA). In response to these questions, I thought it might be helpful this month to team up with my colleague Kara Gansmann and have her offer some insights on the ACA. Below is the first part of a two-part series where she shares some basics every employer should know about the ACA.
Only “large” employers are subject to the “play or pay” provisions of the act. In 2015, employers with 100 or more full-time equivalent employees are considered applicable large employers under the act, including for-profit, nonprofit and government-entity employers. In 2016 and beyond, applicable large employers are those that have 50 or more full-time equivalent employees. Only work performed by employees in the United States is considered. Employers who do not hire the specified number of full-time equivalent employees are not large employers under the act, and therefore, not subject to these employer provisions of the act.
Eligible, full-time employees of large employers must be offered health care benefits under the act. A full-time employee works on average at least 30 hours of service per week or 130 hours in a calendar month. Two part-time employees, whose combined hours are at least 30 hours of service per week, are considered to be one full-time-equivalent employee. Hours of service are hours in which an individual is expected to be paid, including paid interns, but not bona fide volunteers or unpaid interns. Seasonal employees and variable-hour employees present administrative headaches for calculating full-time-equivalent employees under a retrospective calculation called a “look-back measurement method” to determine eligibility for benefits.
What, When and Why
Effective as of January 1, 2015, large employers must offer affordable, minimum essential coverage of minimum value to at least 70 percent of full-time employees. In 2016, that number increases to 95 percent of full-time employees. Right now, if large employers have variable hour or seasonal employees, then these employers are likely in the midst of their first “look-back” period for measuring the full-time status of these workers to determine eligibility for benefits.
Applicable large employers must offer eligible full-time employees affordable, minimum essential coverage of minimum value or potentially be subject to tax penalties under section 4980H.
Applicable large employers, starting in 2016 for the year 2015, will be required to file information returns with the IRS and provide statements to their full-time employees about the health insurance coverage offered. The IRS will use the information provided to administer the Employer Shared Responsibility Provisions.
What if your business is new and just opened? In 2015, your business would be considered an applicable large employer if you are reasonably expected to employ an average of at least 100 full-time employees during the current calendar year and you actually employ an average of at least 100 full-time employees during the calendar year. In contrast, for the next year and beyond, you will determine your status as an applicable large employer using the rules that generally apply (that is, based on the number of full-time employees and full-time equivalents that you employed in the preceding year).
What if you own multiple businesses? Multiple businesses that have a common owner or are otherwise related must aggregate their employees to determine their workforce size, and so would be combined for purposes. If the combined total meets the applicable threshold, then each separate company is subject to the Employer Shared Responsibility provisions, even those companies that individually do not employ enough employees to meet the threshold.
What if you use contract workers? Temporary and contract workers retained through a third-party staffing agency for legitimate business reasons are considered employees of that staffing firm, which is responsible for dealing with the act’s mandates.
In complying with the act, coordinate with your plan administrator, your employment law attorney and accountant. It’s equally important to update your employee policies to keep your employees informed, which makes enforcement of the policies and compliance with the act easier.
This content has been prepared for general information purposes only. This information is not intended to provide specific legal advice. Legal advice is dependent upon the specific circumstances of each situation. The information provided cannot replace the advice of competent legal counsel by a licensed attorney in your state.
Benton L. Toups is a partner at Cranfill Sumner & Hartzog LLP and serves as vice-chair of the Employment Law Practice Group. His practice concentrates on representing businesses in all aspects of labor and employment law. A firm believer in the adage that “an ounce of prevention is worth a pound of cure,” Toups counsels employers on day-to-day issues and assists them in developing and implementing policies to avoid employment litigation. To contact Toups, call (910) 777-6011 or email him at [email protected].
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