CPA & Business Advisory Blog

Will You Be Impacted by the Affordable Care Act, and If So, When?

By: Ted Ginsburg, CPA, JD

There has been a great deal of misunderstanding about the Affordable Care Act (ACA), a law that requires each large employer offering health care programs to offer a certain percentage of its full-time employees affordable health coverage that provides certain benefits, or potentially be subject to an excise tax. The rules are effective for larger employers in 2015, and for smaller employers in 2016. Let’s review some of the rules.

Am I going to be subject to the ACA in 2015 or 2016?

You will be subject to the ACA in 2015 if you have at least 100 full time equivalent (FTE) employees, and will be subject to the ACA in 2016 if you have 50 FTEs. Basically, the FTE total is the sum of the following for the prior year, calculated on a monthly basis:

  • The number of common law employees (for tax purposes) for all related businesses who averaged 30 or more hours of service per week or, if the employer elects, had 130 or more hours of service per month. For hourly employees, hours of service will be based on records of hours worked and hours for which payment is made. Salaried employees are also counted in this figure.
  • For all employees who worked less than full-time, combine their total hours and divide that number by 120.

If I have employees who are subject to a collective bargaining agreement (CBA), can I exclude them from the ACA calculation?

No.

affordable care actIf I am subject to the ACA, which employees must be offered insurance?

Health care programs only need to be offered to a full time employee, defined as a person who is regularly scheduled for 30 hours a week or 130 hours per month; therefore, part-time employees, who are considered in determining whether you are a “large employer”, are not considered for purposes of the penalty provisions. In 2015, you only need to offer health care coverage to 70% of this group; in 2016, you must offer health care coverage to 95% of this group.

Can I charge the employees for health coverage?

You can charge for health coverage; but to keep from violating the ‘affordable’ rule of the ACA, the most that you can charge an employee for single coverage is 9.5% of his/her gross monthly pay. There are some rules that allow you to determine this amount in advance; the most generous rule from the employee’s standpoint would allow you to charge approximately $95 per month.

What type of coverage do I have to provide to the employees?

The program has to contain certain types of coverage (including but not limited to hospitalization, prescription drugs, maternity and newborn care), that pays a certain percentage of the cost; this is the ‘minimum value’ rule of the ACA. Your insurance broker is the best source for determining if your program is ACA compliant. If you have employees under a CBA, you need to check with the union to determine if the coverage is ACA compliant.

What excise taxes do I face if I am not ACA compliant?

There are two potential excise taxes; an employer pays the greater of the two.

  • An employer not offering coverage pays a monthly penalty of $166.67 multiplied by the number of its full-time employees for that month (less the first 80 in 2015, and the first 30 in 2016) if one full-time employee acquires insurance from the health care exchange and receives a federal subsidy.
  • An employer offering coverage which is not ‘affordable’ and/or does not provide minimum value, pays a $250 monthly penalty for each full-time employee who acquires insurance from the health care exchange and receives the federal subsidy for that month.

What should I be doing at this time?

Determine if you are subject to the ACA for 2015, even if you offer health benefits; obtaining the payroll data to make the determination of the number of full-time employees can be more difficult than it appears. If you are subject to ACA, discuss your current program with your broker to determine if it is ACA compliant, determine how much you can charge employees and determine which employees you must offer coverage to.

This is a very general discussion of the ACA rules; there are many exceptions to the above discussion. We would be pleased to assist you in determining the impact of ACA on your company; we can help determine if you are subject to the ACA, and devise strategies for minimizing its impact. For more information on this topic, contact our Compensation & Benefits Advisory Services group at 440-449-6800.

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