Employers had their work cut out for them with the initial deadlines for Affordable Care Act coverage. Now, instead of catching their breath, they're scrambling to meet new requirements on time yet again.
Starting in early 2016, employers have to report to the Internal Revenue Service about their healthcare coverage under Section 6056 of the Internal Revenue Code. Employers with more than 100 full-time employees (FTEs) will be fined if they lack proper coverage. In a workforce that is shifting from full-time workers to contingent employees, numerous companies may start wondering how best to meet this challenge.
Fortunately, there are strategies all employers can use to stay in compliance in a transitional workplace environment.
Determine how many FTEs you had in 2014
The new employer mandate only applies to Applicable Large Employers (ALEs). You can count yourself as an ALE if you employ more than 50 full-time or full-time equivalent employees. For most employers, this calculation will be familiar, but here's a refresher:
To find the total number of FTEs, take your full-time employees and add the total number of weekly part-time employee hours. Divide this number by 30, and you have your total number of FTEs for 2014.
When you work with variable-hour or seasonal employees, this calculation can be a bit tricky. If an employer's workforce only exceeds 50 FTEs during 120 days or fewer during the calendar year, and these extra staffers performed seasonal work as defined by the Secretary of Labor, working no more than 120 days, then the employer is not an ALE.
If your calculations reveal 49 FTEs or fewer for 2014, you don't have to comply with the ACA employer mandate. However, you still need to provide form 1094-B to the IRS and 1095-B to all covered employees.
See if you qualify for transition relief
Employers with more than 50 FTEs are required to comply with the mandate. Luckily, companies with 50 to 99 FTEs may qualify for transition relief. If you meet the following conditions, you qualify for relief:
- Limited workforce size: In 2014, you employed at least 50 FTEs, but fewer than 100.
- Maintenance of workforce: You reduced your workforce for a legitimate reason between February 9, 2014 and December 31, 2014.
- Maintenance of previous health care coverage: You do not eliminate healthcare coverage between February 9, 2014 and December 31, 2015.
In short, you qualify for assistance if you maintain your current health care coverage and you aren't reducing your workforce just to qualify for relief.
Make sure your health plan is affordable
As its name implies, the point of the Affordable Care Act is to make health care coverage more financially accessible. That means you will be penalized if your plan isn't up to par. To find out if your plan qualifies as affordable, take a look at your lowest-cost plan to ensure it doesn't exceed 9.5 percent of:
- The employee's 2014 wages.
- The federal poverty level for an individual.
- An amount equal to 130 multiplied by either the employee's hourly rate of pay as of the first day of the coverage period, the lowest hourly rate during the calendar month, or 9.5 percent of the employee's monthly salary for salaried employees.
If you pass this test, you should be in the clear.
File forms 1094-C and 1095-C
The next step is to fill out your paperwork and send it in. Here are the primary documents you need to worry about:
- 1094-C: This form identifies the business and the number of full-time employees, and whether the business offered any Minimum Essential Coverage (MEC).
- 1095-C: This form reports which employees are covered by the business's insured plan or self-insured health care plans, as well as each employee's share of the monthly premiums.
It's also important to note that all employees must receive their portion of form 1095-C by January 31, 2016. Both forms are due February 28, 2016. However, businesses that file electronically have until March 31, 2016 to get their paperwork in.
There are a number of fines your business might incur from failing to meet compliance under ACA. Companies that don't offer MEC will be required to pay $2,000 for each employee. If you do offer coverage, but it's not affordable, you can be hit with another fine – $3,000 for every FTE receiving a tax credit or $2,000 for each FTE. You are also subject to smaller fines if you miss any forms.
These requirements create yet one more hurdle for business owners, but preparation will reduce the burden.
To learn more about ACA reporting requirements, register for our upcoming webinar.