What Employers Should Know About the Affordable Care Act:

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The Affordable Care Act Employer Shared Responsibility rules
Expertise

What Employers Should Know About the Affordable Care Act:

While Congress continues to debate the future of the Affordable Care Act (ACA), questions loom for many Americans. Individuals and businesses alike are concerned and want to know what to do right now, and how to plan ahead.    

The truth is, no one can predict exactly what is coming next. The only thing we know for certain is, as of right now, the ACA is still the law. In fact, the IRS issued a letter in June reminding employers that the legislative provisions of the ACA are still in force and taxpayers are required to follow the law. This includes the Employer Shared Responsibility rules, or “play or pay” mandate for employers.

Until the ACA's employer coverage and reporting obligations are changed through legislative actions or reforms, businesses with 50 or more full-time employees or equivalents (Applicable Large Employers, or ALEs) must provide ACA-compliant health coverage to employees who work at least 30 hours per week, or 130 or more hours monthly. They must also track and report all employee hours to the IRS and follow other administrative requirements.

The following is a checklist of some key reporting requirements still in effect for companies that fall into the Applicable Large Employer category, along with some practical guidance to help ensure compliance with the current law.

  • The Employer Shared Responsibility rules require ALEs to report and file information about health coverage offered to full time employees using IRS Form 1095c along with transmittal form 1094c. ALEs with self-funded plans are also required to report information about the coverage offered to each individual employee using IRS Form 1095c and file copies to the IRS along with transmittal form 1095c.
  • Full-time new hires must receive a written notice within 14 days of hire date whether or not they are benefits-eligible.
  • A Summary of Benefits and Coverage (SBC) must be provided for each plan describing benefits and coverage by the first day of the employee’s open enrollment, on the first day of coverage, upon request, and prior to any off-renewal changes.
  • The total cost of employee health coverage must be reported on W-2s. This is informational only and has no tax consequences.

Reminders for large employers

If you’re a large employer, here are some additional Do’s and Don’ts that could be applicable (and are worth examining further for your individual case):

  • DO: Comply with requirements of IRS Forms 1094c and 1095c year-end reporting, and distribution of form 1095c to applicable employees.
  • DON’T: Withhold offering coverage to eligible employees, or risk significant tax penalties.
  • DO: Offer coverage that meets the minimum essential coverage and minimum value to all eligible employees, if you have 50 or more employees.
  • DON’T: Offer different premium contribution rates to certain types of employees. For example, don’t offer to pay for 100 percent of health care premiums for salaried employees and 50 percent for hourly employees. Doing so could result in tax penalties.
  • DO: Follow non-discrimination rules to ensure premium contributions for Highly Compensated Employees and Non-HCEs are not more favorable for one than the other.
  • DON’T: Delay or avoid filing IRS Forms 1094c and 1095c year-end reports to the IRS or distributing Form 1095c to applicable employees. Failing to issue these forms or filing them late may result in penalties from the IRS.

What’s on the horizon

Most businesses and health care reform advocates are hopeful that any new legislation will lift some of the financial and administrative burdens on employers — though even without a mandate for employers regarding healthcare, it’s expected that most companies will continue to offer employer-sponsored health benefits. Providing attractive employee benefits helps companies to recruit, retain and value talent and remain competitive. On the other hand, employers with mostly low-wage, high turnover positions — companies that offered health coverage mainly to avoid ACA tax penalties — likely will stop offering health coverage altogether or cut back on the number of employees eligible to enroll in any company-sponsored plans.

There is no escaping the fact that the list of requirements under the ACA is long and, for many businesses with limited resources, difficult to manage. Making sense of any new reforms will be an added burden, regardless of whether the changes are welcome by employers. All businesses with employees should review the current ACA rules and work with compliance experts as needed to assist with managing the compliance process throughout the year, not just at year-end, and going forward.

For a detailed description of the Affordable Care Act and the current regulatory provisions, including penalty rules and amounts, visit the IRS website.

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