After years of debate and untold numbers of articles, questions and explanations, health care reform is in full swing. But just when businesses think they understand the ins and outs of the Affordable Care Act, a new wrinkle emerges. Unfortunately, sometimes those wrinkles can result in penalties. Reduce your company’s odds of being fined with these quick tips:
1. Know whether your company is accountable for the Employer Shared-Responsibility Requirement. Breathe easy if your company is very small: Only employers with 50 or more full-time-equivalent (FTE) employees are affected. While larger employers with 100 or more FTEs must comply in 2015, employers with 50 to 99 FTEs have a grace period until 2016.
2. Know the standards coverage must meet to be compliant. There are just two criteria:
- Coverage must be considered affordable, meaning it can’t exceed 9.5 percent of an employee’s household income.
- Coverage must have an actuarial value of at least 60 percent, meaning it must pay, on average, 60 percent of the cost of essential health benefits.
3. Understand that employers with 50 or more FTEs are required to extend compliant coverage only to those working at least 30 service hours per work and their dependent children under age 26. Service hours include hours worked and hours for which an employee is paid but doesn’t work – for example, vacation, holiday, illness or disability, jury duty and military duty hours.
4. Know that two things must combine to trigger ACA penalties. First, an employer with 50 or more FTEs must fail to offer complaint health care coverage. Second, at least one full-time employee must qualify for and receive a premium subsidy in the individual insurance market through a federal or state exchange.
5. Weigh potential noncompliance penalties against the cost of offering coverage. Keep in mind that there are nonmonetary benefits to offering employees health care coverage. These include improved job satisfaction, loyalty and morale.
6. Beware the upcoming Cadillac Tax. Named after Detroit’s luxury automobile, a 40 percent Cadillac Tax is scheduled to take effect in plan years beginning on or after Jan. 1, 2018. Although regulations could evolve before it’s implemented, employers can begin to determine how their plans might be affected when the tax goes into effect. Get the details on the tax, including how it’s calculated, who pays it and what products are involved, by checking out some commonly asked questions and answers.
To learn more about health care reform, go to: https://www.aflac.com/health-care-reform/navigating-health-care-reform/default.aspx.
Please note that HCR material herein is intended to provide general information about an evolving topic and does not constitute legal, tax or accounting advice regarding any specific situation. All readers are strongly encouraged to discuss their HCR situations with their advisors to determine the actions they need to take or to visit healthcare.gov (which may also be contacted at 1-800-318-2596) for additional information.
Bank of America, N.A. engages with American Life Insurance Company of Columbus (“Aflac”) to provide informational materials for your discussion or review purposes only. Aflac Inc. is a registered trademark, used pursuant to license. The third parties within articles are used under license from Aflac. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.