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The Affordable Care Act Requirements

ECS Article - Mission-Critical Services...The Affordable Care Act Requirements

Last year, we sent out information regarding the employer health insurance reporting requirements that came about as a part of the Affordable Care Act (ACA). Because the effective date is quickly approaching for some employers, we are revisiting these requirements. We recommend that employers familiarize themselves with the requirements based on their size classification so that those required to file for 2015 can make sure they have collected the necessary data for year-end reporting. Under the ACA, employers are divided into two groups: small employers and large employers. Small employers are those who employ less than 50 full-time or full-time equivalent (FTE) employees (either individually or collectively if part of a controlled or affiliated service group). Large employers are those who employ 50 or more full-time or FTE employees. An employee is considered full-time if they work 30 or more hours per week on average. For the purpose of this provision, employers must aggregate the average hours of employees who do not meet the full-time criteria in order to calculate FTE employees. For example, if an employer has two employees who each work 15 hours per week on average, then those two employees are counted as one FTE employee. This is because between both employees, 30 hours of work per week is being performed. Under the ACA, there is an "employer mandate," which requires employers to offer health insurance to their full-time employees that meet certain requirements, or face penalties. If you are classified as a small employer, this requirement does not currently apply to you. For large employers with 50 to 99 full-time or FTE employees, these requirements begin in 2016. For large employers with 100 or greater full-time employees or FTE employees, these requirements began in 2015. In order for health insurance offered to comply with the requirements of the ACA, it must have several features. For 50 to 99 FTE employees, the plan must be offered to 95% of full-time employees and their dependents up to age 26 beginning in 2016 (70% of full-time employees for large employers who must offer coverage in 2015, increasing to 95% in 2016). The plan must provide "minimum value," which is designated as paying at least 60% of the cost covered services, for which the IRS is offering a "minimum value" calculator on their website. Finally, the coverage provided must be affordable. Affordable is defined as not exceeding 9.5% of an employee's household income. Because an employer may not know an employee's household income, there are three safe harbor methods with can be used to compute affordability. These safe harbors are: 9.5% or less of an employee's W-2 wages, 9.5% or less of an employee's monthly wages, or 9.5% or less of the federal poverty level for a single individual. In addition to requiring many employers to offer health insurance, the ACA contains several new health insurance reporting requirements. Similar to W-2 reporting, certain employers offering health insurance will be required to file individual information returns (either 1095-B or 109