ACA Compliance for Applicable Large Employers to Avoid Penalties
The Affordable Care Act (ACA) reporting and audits that demonstrate compliance on paper starts this year, 2016. Although the forms and filing may be a complicated process, those who don’t comply will face penalties from the IRS. Having a software system to keep track of the needed information for filing and printing out reports would be a blessing.
However, for many businesses year round preparation and organization will make the process easier. Understanding the new requirements and providing the information for compliance may see complicated and overwhelming, but knowing what information is needed can simplify the process.
Definition of an Applicable Large Employer under the ACA Regulations
Under the Internal Revenue Code (IRC) Section 4980H, applicable large employers must offer health coverage to full time employees and will be penalized if no coverage is offered, the offered coverage is unaffordable or it does not provide minimum coverage. The Employer Shared Responsibility Provision also require an assessment if only even one full time employee receive a premium tax credit for purchasing coverage in the new individual Marketplace.
To determine if your business has greater than 50 employees, all employees that worked at least 30 hours a week or 130 hours monthly are counted as well as the total number of hours worked by part time employees divided by 120 to get the count of “full time equivalent” (FTEs) employees to get the total number of full time employees. Although employers of 50 to 100 employees are not subject to penalties for the 2015 year, they are required to report this information.
Qualifying businesses must provide minimum essential coverage to at least 95% of full time employees. Employers must also track and document that all eligible full time employers were offered health coverage and if the employee waived the coverage.
Employers must report the cost of employer sponsored health plans on employee’s W-2 forms to show the total cost of individual healthcare of the group health plan. The total cost of coverage should be reported. This includes both employer and employee contributions. The affordable Coverage Standard is that employee’s contributions must not exceed 9.5 percent of wages.
The Minimum Value Standard requires that the total allowed costs of benefits must be above 60% of the costs. The plan must also include substantial coverage for in patient hospitalization and physician services. Employees will receive a new tax forms this year, the 1095 and employers should provide employees with information about their benefits and coverage through a summary plan description or a summary of benefits and coverage.
Summary of Provisions
The following is a brief summary of ACA requirement:
– The Employer Shared Responsibility provisions require employers with 50 or more full time employees to offer coverage to 95% of their employees and their dependents. The coverage should be affordable and provide minimum coverage.
– 2016 is the first year of Information Reporting on Health Coverage. The deadlines have been extended and now require employers must furnish information to individual by March 31, 2016 and file with the IRS by May 31 on paper and June 30 electronically.
– Other than employer payment plans, an employer can reimburse employees for premiums paid through a qualified health plain in or outside the Market place. However such arrangements does not meet the Affordable Care Act and an employer may be assessed an excise tax of $100 a day and up to $36,500 a year for each employee.
– A employer must furnish employees with a Summary of Benefits and Coverage form that explains their plan’s cost and what it covers to help them understand and consider their health insurance option. Employers can be assessed a penalty for non-compliance.
– The ACA also dictate that insurance companies spend at least 80% of premium cost on medical care rather than administration costs or provide rebates to policy holders which is usually the employer who provides a group health plan.
– Employers who issue more than 250 W-2 forms must include the total cost of employee health coverage on W-2s.
– Under the Flexible Spending Account Contributions, there is a limit of $2500 on elective employee contributions, not employer contributions and it does take cost of living adjustments into consideration.
– Employers are obligated to withhold an additional 0.9% for Medicare Part A Hospital Insurance on employees earning over $200,000 for single and $250,000 for married joint filers but employer contributions remain the same.
– Since 2013, net investment income including taxable capital gains, interest, dividends, rents and royalties over $200,000 for single and $250,000 for married joint filers is assessed a 3.8% tax.
– Employees eligible for health coverage will only have to wait for 90 days for coverage.
– ACA also increased incentives for employers who participate in workplace wellness programs and reward employees from 20 to 30%. The maximum reward for programs that are designed to prevent or reduce tobacco use is 50%.
Although the summary provides the major areas businesses should be aware of for compliance, it may still require further scrutiny to make sure all bases are covered. The bill is 2,400 pages and complicate but the Small Business Administration website offer links for those who want more information on the subject.
Article provided by Neches FCU, with locations in Port Neches, Nederland and Beaumont.
Neches FCU is a trusted Texas Credit Union and has a courteous and attentive team of professionals ready to provide services to our members.
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They are respected for a personal, dynamic and upbeat work atmosphere, providing a memorable service experience, and where members are known by name.