Affordable Care Act Requirements for Employers

By Team HRH | January 13, 2016

The Affordable Care Act (ACA) has imposed a requirement that large employers must provide minimum essential health insurance coverage for their employees. Although the act was signed into law several years ago, employers may begin to face penalties for not complying beginning in 2015. Employers with 100 or more full-time equivalent employees (FTEs) must comply beginning in 2015 and employers with 50-99 FTEs beginning in 2016. Employers with 49 or fewer FTEs are not required to provide health insurance coverage, however there may still be reporting requirements for these employers.

Employers with 100 or more full-time equivalent employees

In 2015, you are required to provide minimum essential coverage to 70% of FTEs. Minimum essential coverage means the coverage must provide minimum value and be affordable. For companies that have plan years ending during 2015, there is transition relief available to potentially waive penalties. Employers that do not comply with the requirements of the ACA may be subject to penalties beginning in 2015, discussed later. In 2016, the requirements for employers with 100 or more FTEs increase. You will be required to offer minimum essential coverage to 95% of FTEs increased from 70% in 2015. The penalties for not providing minimum essential coverage or affordable health insurance coverage are currently set to rise slightly in 2016.

Employers with 50 to 99 full-time equivalent employees

Although employers with 50 to 99 FTEs are required to provide minimum essential coverage in 2015, there is transition relief available to these employers for 2015. Employers with 50 to 99 FTEs can request transition relief in 2015 in order to waive the penalties for not complying with the ACA. Beginning in 2016, these employers will face penalties for not offering minimum essential coverage to 95% of their FTEs. As discussed previously, minimum essential coverage consist of providing minimum value which means the insurance pays 60% of the medical expenses and the coverage must be affordable which means the employee portion cannot exceed 9.5% of their income. Penalties for not complying will be discussed later.

Penalties

The following penalties apply to employers with 50 or more FTEs that do not qualify for transition relief in 2015. In 2016, all employers with 50 or more FTEs will be subject to the potential penalties because no transition relief is available after 2015. The penalties will increase slightly in 2016.

  • If minimum essential coverage is not offered to employees and at least one employee goes to the marketplace for insurance and in return receives a premium tax credit (often referred to as a subsidy):
    • $2,000 annual penalty calculated on a monthly basis for each employee over employee number 80 for 2015 (30 for 2016 and on)
    • Example: A company with 100 employees does not offer minimum essential coverage so one employee goes to the marketplace for insurance and receives a premium tax credit. The penalty will be calculated as follows:
      • 100 employees – 80 employees = 20 employees
      • 20 employees X $2,000 = $40,000 penalty
    • If you do not offer minimum essential coverage and none of your employees receive a premium tax credit, then you will not face penalties related to not offering minimum essential coverage.
  • If affordable health coverage is not offered to employees and at least one employee goes to the marketplace for insurance and in return receives a premium tax credit:
    • $3,000 penalty for each employee that goes to the marketplace and receives a premium tax credit
    • The penalty cannot exceed the penalty that would exist if minimum essential coverage was not offered.
    • Example: A company with 100 employees offers minimum essential coverage, but it is not affordable to employees so all 100 of the employees go to the marketplace for insurance and receive premium tax credits. The penalty will be calculated as follows:
      • 100 employees X $3,000 = $300,000 penalty
        • Note: The penalty cannot exceed the penalty calculated for not providing minimum essential coverage, therefore the penalty is limited to $40,000 in this example as calculated above

Reporting Requirements for Employers:

Beginning in 2015, employers with 50 or more FTEs are required to report their employer provided healthcare coverage on the following forms:

  • Form 1095-C
    • Provided to the individual employees detailing the coverage provided
    • Due to individual employees by March 31st (extended deadline for 2015)
  • Form 1094-C
    • Summary of all 1095-Cs provided to the individual employees filed with the IRS
    • Copy of all Form 1095-Cs must be provided to the IRS with Form 1094-C
    • Due to the IRS by May 31st if paper filing and June 30th  if e-filing (extended deadline for 2015)

Employers that are self-insured and have 49 or fewer FTEs are required to report their employer provided healthcare coverage on the following forms:

  • Form 1095-B
    • Provided to the individual employees detailing the coverage provided
    • Due to individual employees by March 31st (extended deadline for 2015)
  • Form 1094-B
    • Summary of all 1095-Bs provided to the individual employees filed with the IRS
    • Copy of all Form 1095-Bs must be provided to the IRS with Form 1094-B
    • Due to the IRS by May 31st if paper filing and June 30th  if e-filing (extended deadline for 2015)

The following penalties are in place for errors in reporting:

  • General errors
    • $100 penalty per violation per form
    • Maximum penalty of $1,500,000 for employers with 100 or more FTEs
    • Maximum penalty of $500,000 for employers with 50 to 99 FTEs
  • General error corrected by employer within 30 days
    • $30 penalty per violation per form
    • Maximum penalty of $250,000 for employers with 100 or more FTEs
    • Maximum penalty of $75,000 for employers with 50 to 99 FTEs
  • General error corrected by employer within 60 days
    • $60 penalty per violation per form
    • Maximum penalty of $500,000 for employers with 100 or more FTEs
    • Maximum penalty of $200,000 for employers with 50 to 99 FTEs
  • Intentional disregard
    • $250 penalty per violation per form
    • No maximum penalty

All employers with 50 or more FTEs in 2015 that do not qualify for transition relief should be providing minimum essential health insurance coverage at an affordable rate in order to avoid penalties. In addition to providing coverage, all employers with 50 or more FTEs and those with 49 or fewer FTEs that are self-insured must comply with the reporting requirements in order to avoid additional penalties.

If you have any questions, please don’t hesitate to contact the team at Howe, Riley & Howe about these ACA requirements.

This information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Any tax advice contained in this communication is not intended or written to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties.

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