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Employer Health Care Questions Answered
What are the requirements for employers, whether or not they have to offer coverage?
All employers will serve as a source of information for their employees. Starting in the summer of 2013, all employers covered by the federal Fair Labor Standards Act (FLSA) must inform employees about the existence of the exchange in their state and how employees can access it. The Department of Labor has indicated that it will provide guidance to employers and a template for providing such information. This is known as the Employer Notice Requirement
Companies who who offer plans will be required to report the value of employees’ health benefits on their W-2 forms. That rule takes effect for large employers (those who file 250 or more W-2 forms) for tax year 2012 W-2 forms, usually filed in January 2013. The IRS has stated the reporting requirement will be optional for smaller employers until they file their tax year 2013 forms.
What are small business tax credits available ? Whose eligible?
The tax credit are created for employers with fewer than 25 FTEs and who are paying at least 50 percent of the cost of coverage for their full-time salaried and hourly workers. The small-employer tax credit ranges from 35 percent through 2013 to 50 percent after 2014. In order for employers to be eligible, they must purchase their coverage on the exchange between October 1, and March 31, 2014. The amount of the tax credit is based on the number of employees and their pay. Companies with less than 10 FTEs making an average salary of less than $25,000 per FTE would qualify for the highest tax credit. Companies with less than 10 FTEs making an average salary of less than $25,000 are eligible for a credit reduced from the maximum based on size and salary. More information can be obtained through the IRS website
As an employer who do I have to provide coverage to ?
Companies with 50 or more full-time-equivalent employees will be mandated to offer their full-time employees and their dependents under the age of 26 an affordable health benefits package starting in 2014. If they do not offer a health plan they could be liable to pay penalties for not doing so.
Part-time employees’ hours will be considered only for the purpose of determining whether a business is above or below the 50-FTE mark. The law does no require employers to offer affordable coverage of minimum value or pay penalties for part-time employees.
How do I know if I am considered a small business or a large business mandate to the health insurance mandate?
The Affordable Care Act employer mandate start with employers who employed an average of at least 50 full-time-equivalent employees on business days during the preceding calendar year.
Calculation methodology suggestions:
To calculate the number of employees, you must look at each of the preceding 12 months to determine the average number of full-time equivalents you employed over those months. Under the law there is a specific calculation to use. For each of the 12 months,
1) A company must look back and determine how many employees worked 130 hours or more in the calendar month. That will be the number of full-time employees the employer had during that month.
2) A company must add together the hours of all other employees, but not count more than 120 hours per person. The total hours worked by all other resources is then divided by 120. Adding these numbers together will determines a full-time-equivalent number for your non-fulltime employees and fulltime employees.
3) Finally, the employer must: — Repeat the process for each of the remaining 11 months. – Add each of the 12 numbers together. – Divide by 12 for the average annual full-time employee equivalent number. That is the number that employers must use to determine whether an employer is considered an applicable large employer.
If the total number of full-time-equivalent employees is 50 or higher, the employer is subject to the mandate. If the number is below 50, the employer is not considered a large employer and not subjected to the mandate.
Businesses should look at the preceding calendar year to determine if they meet the threshold of 50 full-time-equivalent employees for the following year, according to the Treasury Department. The annual calculation is performed monthly and then averaged over the 12 months.
If I am required to offer health care coverage to my employees, what are the requirements for the health plans?
Companies subjected to the mandated requirement to offer affordable coverage of minimum value, will be required to cover 60 percent actuarial value) to meet the requirements of the law.
Are there any credits or subsidies available for individuals and families?
The Affordable Care Act has put in place several credits and subsidies. The eligibility of the subsidies starts at incomes between 100 and 400 percent of the federal poverty level. The tax credit will be used on the exchange to buy coverage to satisfy the individual mandate. The health insurance market place will play a key role in certifying which individuals are eligible to obtain the premium tax credit.
What are the penalties for employers subject to the law who don’t offer coverage?
If a company with 50 or more employees based on the calculation above chooses not to offer coverage they will be subjected to a penalty. Below is an example. A company can exclude the first 30 full-time employees in calculating their penalties. If an employer has 80 full-time employees who choose not to offer coverage and has at least one employee who receives a tax credit on the exchange would face an annual penalty of $80,000, assuming a constant workforce. [80 total full-time employees – 30 full-time employees excluded from the calculation = 50; 50 x $2,000 penalty = $100,000.]