February 28, 2015
Affordable Care Act Employer Mandate Rules in Effect January 1, 2015
By Scott Calhoun, Hendrick, Phillips, Salzman and Flatt
After numerous delays and transition rules, the employer mandate requirements of the Affordable Care Act ("ACA") are about to go into effect for some large employers. The employer mandate rules of the ACA require that contractors and other employers who have 50 or more "full-time equivalent" employees ("FTEs") must either offer health insurance to their full-time employees or potentially pay fines. Under the final regulations, however, these rules go into effect for employers with 100 or more FTEs on January 1, 2015. (The effective date for employers with between 50 and 99 FTEs is January 1, 2016). We wanted to provide this brief reminder of some of the important elements of these requirements.
In determining whether a contractor is subject to the requirements, the first step is to calculate how many employees the contractor has (under the ACA's rules). In making this calculation, the employer has to count full-time employees and "full-time equivalents". There are special rules related to counting seasonal workers and employees of controlled groups of companies. If after applying all the rules an employer has 100 or more FTEs (for 2015; 50 or more FTEs for 2016 and beyond), then the employer qualifies as a "large" employer.
Once an employer is determined to be a "large" employer, it must then provide insurance to all full-time employees. However, a slightly different set of rules applies to determining which employees will be treated as the full-time employees requiring coverage. If an employer does not meet the requirements for offering coverage, the penalty applies. Special transition and calculation rules apply to enable an employer to properly determine how to count new hires and ongoing employees. Because trying to make this determination could be a burden on employers, the proposed regulations have adopted several safe harbors for employers to use in making these calculations, rather than having to make the determination on a monthly basis throughout the year. These safe harbors involve the use of certain look-back periods which give certainty to the calculations.
Employers which are subject to the employer mandate must offer full-time employees health insurance coverage that is classified as "affordable" to the employees and that satisfies "minimal value". If a large employer does not offer health insurance and one of its employees obtains a tax credit to purchase insurance from one of the exchanges that are being established under the ACA, the employer is assessed $2,000 per year for each full-time employee, excluding the first 30 full-time employees. The regulations provide, however, that for the year 2015 only, employers with 100 or more FTEs can exclude the first 80 full-time employees from the penalty calculation. Large employers who offer health insurance that is unaffordable or lacks minimum value are subject to an assessment of $3,000 per year for each full-time employee receiving federal financial assistance. This payment cannot exceed the assessment the business would pay if it did not offer health coverage.
Because the law is new and very complex, we anticipate that many contractors will have questions about whether they are subject to the law and how they can comply. If we can be of assistance, please feel free to contact Scott Calhoun at 404-469-9195, or you can email him by clicking here.
Real Data Capture Becoming Part of BIM
Click here to read the entire article.