Are you short on time and looking to educate yourself with some of the facts about Obamacare? Here are a few items you need to know right now.
30 Is the New 40
A small, but important, detail for employers to understand is how a full-time employee is classified under the ACA. The answer is that a full-timer works 30 or more hours per week over a period of 90 days. In the U.S., the 40-hour work week has long been a standard for full-time, but not anymore. Remember, under the ACA, 30+ hours is full-time, not 40.
Fun With Words (Sort-of)
Do you know what ‘subterfuge’ means? The word is sprinkled throughout the ACA regulations and means to deceive by slyness to avoid an unpleasant circumstance. The new unpleasant circumstance for applicable large employers (50+ FTEs) is compliance with the ACA and the potential for penalties. But subterfuge is not the recommended approach. It is important for employers to understand that this law is already in effect and will begin in full January 1, 2014. For some businesses, the reality is that the
ACA will mean new and/or increased costs. However, there are ways to educate and prepare now to avoid or reduce penalties in the form of taxes to the IRS. Here are a couple of strategies.
Look back period
Regulations released in November, 2012 offered employers certain flexibility to determine whether or not their company qualifies as an applicable large employer. Remember, an applicable large employer is an organization with more than 50 full-time equivalents. Google 2012-58 for the text of the regulation, but in summary, if your business is seeing an impact from the law, you can utilize several safe harbors through a look-back period. Employers who could see penalty exposure need to start compiling information and determining which look-back period is desirable. You can choose between 3-12 months and classify it by groups of employees.
Applicable Large Employer
An applicable large employer is a company that employs more than 50 employees who average at least 30 hours per week for one year. The pay or play mandate only applies to firms with more than 50 FTEs. If you are a company with less than this number most of the taxes and penalties do not apply to you.
Minimum Essential Benefits
Beginning in 2014, health insurance plans will need to meet a minimum standard as defined in the law. This standard is based upon actuarial value and every policy must meet at least 60 percent actuarial value to qualify as meeting the minimum standards under the ACA. This means the insurance plan must cover a minimum of 60 percent of the cost. They will be tiered by metallic level. Bronze (60 percent), Silver (70 percent), Gold (80 percent) and Platinum (90 percent). For more on this issue check out this article from Health Affairs.
Affordable Health Plan
The affordability provision in the law means the coverage offered by an employer over 50 full-time equivalents must not cost the employee more than 9.5% of their income for a single policy. Applicable large employers may need to scale employee insurance contributions based upon income. Out of pocket cost for the employee cannot exceed more than 9.5% of their income.
Do not be reactionary with the IRS. Here is what E.D. Bellis recommends.
Ask these simple questions on the ACA
- How many employees do you have?
- How much do you pay them?
- Do you currently offer benefits?
- Do you plan on growing, downsizing?