The passage of the Patient Protection & Affordable Care Act (ACA) has changed the world of health care and significantly increased employers’ compliance responsibilities. For companies processing payroll and tax filing through ComputerSearch, our new ACA services help enable you to be compliant with the employer reporting and print responsibility provisions of ACA in IRS Code sections 6055 and 6056.
The “Affordable Care Act”
To date, most of us have heard of the “Affordable Care Act “(ACA) or “ObamaCare” mentioned in the news or media. If you are curious about this piece of legislation, we hope to clarify some of the basics by visiting the following items:
- What is the “Affordable Care Act “(ACA)?
- Introduction of some key terms
- How does it affect you?
- How can ComputerSearch help you meet the reporting requirements?
The Affordable Care Act (ACA), or what may be referred to as “ObamaCare” is a Federal statute which became law in March 2010. This provision was adopted under the title of The Patient Protection and Affordable Care Act. The law included many components that are scheduled to take effect over a number of years such as; expansion of Medicaid eligibility, establishing health insurance exchanges, and not permitting insurance companies to deny coverage for pre-existing conditions.
Large Group Health Care Reform Glossary Of Key Terms
An employer is required to pay a minimum of 50% of the lowest cost single coverage not to exceed 9 ½% of the employees adjusted gross household income. If the employer cannot determine the employees gross household income they may use one of 3 safe harbor methods to determine whether the coverage is deemed affordable:
- W-2 safe harbor – use employees W-2 income shown in box 1.
- Rate of pay safe harbor – multiply the employee’s hourly rate by 130 hrs to determine monthly income, or use a salaried employee’s monthly income. You cannot use this method if the employees’ rate of pay was changed during the calendar year.
- Federal poverty line safe harbor – use the federal poverty guideline for single individual.
Applicable Large Employer (ALE)
Any business and/or combination of businesses with control group status employing 50 or more full-time equivalent employees (FTE’s).
Tax Year 2015 – companies with over 100 FTE’s are required to provide affordable coverage.
Tax Year 2016 – companies with over 50 FTE’s are required to provide affordable coverage.
A child or children of an employee who are under the age of 26.
Full-Time Equivalent employee (FTE)
In order to determine the number of full-time equivalent employees, add total hours worked by part-time employees for the month and divide by 120. This will give you the full-time equivalent, and full-time employees to determine the total number of full-time equivalent employees (FTE’s). Excluded are partners in a partnership, sole proprietors, least employees, and an S Corp. shareholder with 2 percent ownership or less.
Hours of Service Calculation
There are 2 methods for tackling the hours of service for hourly and salaried employees.
hourly employees – Use their actual hours of service from record of work and hours for which payment will be made.
Salaried employees – is one of the 3 methods below.
- Use their actual hours of service from record of work and hours for which payment will be made.
- Days worked equivalency – each day worked is credited with 8 hours regardless of the number of hours worked.
- Weeks worked equivalency – the employees credited each week with 40 hours of service as long as they worked at least one hour.
An employer may use different methods for tracking salaried employees as long as they are consistent amongst different classes.
If the equivalency method would substantially understate and employees hours a service it may not be permitted.
Hours of service outside the United States are generally not counted. Employees employed overseas generally will not have hours of service and do not count as full-time employees. US employees working overseas will count all hours of service.
Household Income Reporting
An employer does not have access to employee’s family income; the IRS has provided affordability safe harbor methods for determining affordability.
Minimum Essential Coverage (MEC)
Health insurance coverage must meet minimum standards of benefit within each state that is considered to offer minimum essential coverage (MEC). New York State insurance Department requires all plans issued provide minimum essential coverage.
An employer is required to provide MEC to 95% of full-time eligible employees and their dependents to avoid penalty, for plan year 2015 MEC must be offered to at least 70%.
All health insurance plans offered must pay for Lee 60% of the cost of medical treatment or expenses to be considered minimum value.
Any employee who works fewer than 30 hours per week or less than 130 hours per month.
United States Department of the Treasury has given a one-year delay for 2015 for employers with 50 to 99 full-time employees to comply with the employer shared responsibility provisions of the affordable care act, their obligation to comply resumes in 2016.
As for companies with 100 or more full-time employees are currently subject to the employer shared responsibility provisions. For 2015 those employers must offer coverage to the 70% of the eligible full-time employees. For 2016 all eligible employers must offer coverage to 95% of their eligible employees.
There are 2 methods penalizing companies under the employer shared responsibility provision.
- When an employer does not meet the MEC offer test and at least one full-time employee receives premium subsidy through the state insurance exchange, the penalty for the year will be the number of full-time employees -30 employees times $2000.
- An employer meeting the MDC test but does not offer coverage of minimum value, or does not offer affordable coverage to at least one eligible employee, or there is these 1 eligible employee who is not offer coverage and who obtains a subsidy to the marketplace the penalty will be $3000 each.
For an employer who has Full-time employees receiving health insurance exchange subsidies may not be subject to a penalty if the employer plan offers minimum essential coverage and steamed affordable using one of the safe harbor methods. These employers would only be charged a penalty for any full-time employees were not offered minimal essential coverage and who receive a subsidy. There are no penalties charge to applicable large employers with fewer than 30 eligible full-time employees.
Seasonal Employee Exception
When an employer’s workforce exceeds 50 full-time equivalents for 120 or fewer days during a calendar year and the employees over 50 during that time are seasonal workers, the employer would not be considered an applicable large employer. The 4 months/120 days do not have to be consecutive
How does the “Affordable Care Act “(ACA) affect you?
The primary factor determining the impact and requirements of the ACA on your organization is the number of Full Time equivalent (FTE) employees. Currently those organizations with 50 or more Full-Time Equivalent (FTE) employees will need to file annual information return reporting whether and what health insurance they offered employees. In addition, they are subject to the Employer Shared Responsibility provisions.
To find out specifics as to what the responsibility of your organization will be under the ACA, the link below to the IRS website will provide additional information.
How can ComputerSearch help you with the ACA?
Even though the ACA is a health care provision mainly involving the employer and health care provider, ComputerSearch will be able to help facilitate the production of the following ACA Reporting:
ACA Look Back Reporting – This is the Full Time Equivalent (FTE) reporting referred to in the ACA. We can currently run this reporting based on your payroll data at your request.
Production of Forms 1094-C and 1095-C – For interested Clients, ComputerSearch, through our payroll system will provide the ability for clients to produce ACA forms 1094-C and 1095-C. For clients submitting electronically through our MicroPay System, there will be an added component which will allow you to enter the required information supplied by your Health Care Provider. This data combined with your existing payroll history will result in the production of the 1094-C and 1095-C forms. There will be options available as well for those clients who currently do not submit their payroll electronically through the MicroPay System.
Stay tuned, details concerning the production of these reports and options will be sent out with payrolls this Fall as well as appear on this website.