Every business owner should address how the Affordable Care Act (ACA) will impact their business. There are reporting requirements in effect for the 2015 calendar year as well as potential employer health insurance coverage offering requirements, both having substantial fines for noncompliance. To be prepared you need to know the following:
- How to determine & document your Applicable Large Employer (ALE) status
- ALEs with 50 to 99 employees (defined below) are subject to reporting requirements
- ALEs with 100 or more employees (defined below) are subject to both reporting and Affordable Health Insurance Offering requirements
- New rules & noncompliance fines exist for employee insurance reimbursement plans
1. Determination of Applicable Large Employer (ALE) Status
An ALE is an employer that employed an average of at least 50 full-time and full-time equivalent employees during the preceding calendar year. A full-time employee is one that averages at least 30 hours of service per week or 130 hours per month. The number of full-time equivalent employees is calculated by adding the total hours for all part-time employees for each month and dividing by 120. Additionally, companies with common ownership may need to be aggregated to determine their status as an ALE.
2. 2015 Reporting Requirements: IRS Form 1095-C, “Similar to W-2s”
If you had 50 to 99 employees (defined above) in 2014 you are subject to the new reporting requirements for 2015 but you are NOT subject to the 2015 health insurance offering requirements. Forms 1095-C must be provided to employees by 1/31/16 and Forms 1094-C/1095-C must be provided to the IRS by 2/28/16. Penalties for not reporting will range from $500 to $1,000 per employee. If you determine you have reporting requirements, you need to start gathering the necessary information as soon as possible. In order to complete the Forms 1095-C, you will need information about insurance offerings and coverage for each month of 2015 for each full-time employee.
Any employer that sponsors a self-insured health plan is required to report, even if the employer has fewer than 50 full-time employees.
3. 2015 Affordable Health Insurance Offering Requirements
If you had 100 or more employees (defined above) in 2014 you are subject to the above reporting requirements for 2015 as well as the insurance offering requirements, meaning you must offer affordable, minimum value health insurance coverage to at least 70% of your full-time employees or be subject to penalties.
More businesses will be subject to increased requirements in 2016. If you have 50 or more employees (defined above) in 2015 you will be subject to the reporting requirements for 2016 as well as the insurance offering requirements, meaning you must offer affordable, minimum value coverage to at least 95% of your full-time employees by April 1, 2016 or be subject penalties.
4. New Rules & Noncompliance Fines for Employee Insurance Reimbursement Plans
Employers may no longer reimburse employees for health insurance premiums on their individual policies because these arrangements violate the new Market Reforms and may be subject to $100 per day excise tax per employee ($36,500 per year per employee). Employers need to consider alternatives to multi-employee reimbursement arrangements to avoid penalties. This provision does not apply to single employee plans.
There are also strict requirements on how reimbursement arrangements for >2% shareholders of S corporation and partners should be handled in order to get a deduction for self-employed health insurance. Premiums paid on behalf of partners must be reported as a guaranteed payment to the partner on Form K-1. Premiums paid on behalf of a >2% shareholder must be included as W-2 wages paid to the shareholder.
Our Services
The ACA has many complicated provisions and we are available to help you sort through the various provisions and the related computations associated with ACA. We are pleased to offer the following services:
- Calculate and document determination of employer “status”.
- Prepare and submit forms to employees and IRS (FORM 1095/1094-C), similar to W-2 process.
- Provide consulting services to help you sort through the various ACA provisions.
We would be pleased to discuss issues related to the ACA with you. If you anticipate needing our assistance to comply with 2015 reporting requirements, we request that you engage us in the process during November to allow sufficient time to gather and input the necessary data. For more information on this topic or any other business advisory services, please contact Jessica Pagan or Murry Guy at (334) 887-7022.
