ACA

Affordable Care Act Employer Mandate- Play or Pay in 2015?

Learn how the Affordable Care Act Employer Mandate can affect you.

Oct 20, 2014

Affordable Care Act Employer Mandate- Play or Pay in 2015?  The Affordable Care Act (ACA) includes provisions to encourage applicable large employers to:

  1. Provide health care coverage to employees
  2. Make coverage affordable

These ACA provisions impart an employer surcharge on those who do not meet certain requirements. Under the ACA, “applicable large employers” have at least 50 employees. For 2015 only, temporary relief was granted for those with less than 100 full-time employees.

What is my risk?

Risk depends on the percentage of ACA-defined full-time employees offered health care coverage. In general, the ACA defines full-time employees as those working at least 30 hours per week. Even if coverage is offered to most or all of these employees, penalties may be incurred if that coverage is deemed unaffordable.

Follow the flow chart below to see how penalties are assessed:

BPAS-10-20-14-Penalies-Flow-Chart

4980H(a) Penalty: $2,000 per year for all full-time employees, excluding the first 80 (30 for 2016+) if at least one employee receives a premium tax credit to pay for coverage in an Exchange.

4980H(b) Penalty: $250 monthly ($3,000 annually) for each full-time employee who receives a premium tax credit to pay for coverage in an Exchange. To trigger this penalty, the employee’s household income must be less than 400% of the federal poverty limit and the employee cannot be eligible for Medicaid. Benefits are deemed unaffordable if employee contributions are greater than 9.5% of household income. Affordability is determined based on the lowest-cost plan for which the employee has enrollment access.

Why does it matter right now?

1. ACA allows an option to use past periods to determine whether or not employees are full-time as defined by ACA for 2015. Therefore employers are likely currently in the time period that will be needed for tracking employees.

2. Since the offer of coverage and affordability requirements are based on what happens in 2015, employers should understand their risk exposure prior to open enrollment, which is quickly approaching for calendar year plans.

3. Data tracking capabilities need to be considered to complete IRS reporting requirements, which are due in early 2016 for the 2015 calendar year.

a. 4980H(a) penalties are based on the offer of coverage to employees for 2015. Enrollment in the plan does not affect surcharge risk; it only matters whether or not there was an offer of coverage.

b. 4980H(b) penalties are based on 2015 employee contribution toward the lowest-cost health benefit offered to a particular employee.

If you have questions about the 4980H(a) and (b) penalties or other matters related to the ACA employer mandate, please contact your Harbridge Consultant or visit BPAS.com.