The Affordable Care Act: Reporting and Penalties
Beginning January 1, 2014, large employers must provide employees and their dependents the opportunity to enroll in minimum essential insurance coverage. A large employer is one that has employed, on average, 50 full-time equivalent employees (FTE) during the preceding calendar year.
A full-time employee works an average of 30 or more hours per week (paid time off is included for computation purposes); part-time employees who work less than 30 hours must be considered in the calculation of monthly full-time equivalent employees by taking their total monthly hours divided by 120.
While some business owners are cutting employee hours or considering reclassifying employees as independent contractors since only employees fall within the mandate, they do this at their peril. Government agencies, including the IRS, are aware of this temptation and have increasingly cracked down on what they consider to be the misclassification of employees. A form will be sent out to employers from the Department of Labor during either the third or fourth quarter of 2013, where employers must report employee statistics of the company and any entities that are considered to be in a controlled group. There are onerous record keeping provisions that companies must maintain about employee work hours that must be submitted and will be used to determine how many full-time employees a business has.
In order to provide minimum essential insurance coverage, premiums for the lowest-cost, employer-sponsored health coverage must not exceed 9.5 percent of an employee’s household income, or the plan is not considered to be affordable for the employee. A plan fails to provide minimum value if it covers less than 60 percent of the total allowed costs of benefits provided under the plan. Employers must offer this “Bronze Plan” to fit in the safe harbor provisions. If an employee declines this coverage from the employer, the employee will not be able to get subsidies from the government if he or she buys insurance on the exchanges.
In addition, under final regulations that came out on Monday, March 11, 2013, a fee of $63 will be charged to the employer for every worker, spouse and child covered by the plan. This is intended to create a $25 billion pool to primarily cover the currently high-risk uninsured that will now be covered by healthcare plans. The concept is that employers now cover a portion of these uninsured workers/dependents who visit the emergency room when they are sick, proving a costly approach to medical benefits.
If employers offer health coverage that is unaffordable, and one or more employees enrolls in a qualified health care plan through a state insurance exchange for which a premium assistance credit or cost-sharing-reduction subsidy is allowed or paid, the employer may be required to pay an annual $3,000 tax. This number is calculated on a monthly basis and is the product of the number of employees qualifying for and receiving the credit or subsidy (less 30) and the monthly tax. If coverage is not offered and one or more employees enrolls in a qualified health care plan through a state insurance exchange for which a premium assistance credit or cost-sharing-reduction subsidy is allowed or paid, employers are subject to an annual $2,000 tax. This number is calculated on a monthly basis and is the product of the number of all full-time employees and the monthly tax less 30.
Beginning in 2014, insurers (and employers who self-insure) will be required to file returns reporting information for each individual for whom minimum essential health coverage is provided.
To learn more about reporting requirements and how to avoid possible penalties, talk to a professional.
Source – South Florida Hospital News and Healthcare Report