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The Basics of the Employer Mandate portion of the ACA

It seems that nearly every day I answer some sort of question concerning the ACA and what exactly it means for business owners.  There is a clear sense that there is a new requirement on the horizon, but no one is exactly sure exactly what they need to do in order to be compliant.  The buzzwords in the media are "Employer Mandate" and "Large Employer" but there is confusion on who that includes and what compliance looks like.  Below is an outline of some of the top level questions and requirements:

First you have to determine if you are a "Large Employer."  A "Large Employer" for 2015 is any employer with 100 or more Full Time Equivalent employees (The threshold is 50 Employees in 2016 and following.) 

Full Time Equivalent Employees (FTES) are calculated as follows:

Part-time Employee Equivalents (Total Monthly Part-Time Hours/120)

+ Full-time Employees (30 hours/week or more)

- Owners

_________________________________________________________

Full-time Equivalent Employees 

 

This determination is performed over a 12 month look back period.  If you are not a Large Employer (more than 100 FTES) you have no responsibility in 2015.

If you are a large employer you are required to offer minimum essential coverage at an affordable rate to all full time employees.  If you do not offer a health insurance plan that meets these requirements, you will have to pay a penalty.

There are several new or ambiguous terms in that statement - so I'll try to offer some clarification. 

For the ACA, Minimum Essential Coverage is based on your Health insurance plan design, not the employer contribution to the plan; this is essentially the equivalent of a "Bronze level" plan, where the insurance carrier pays at least 60% of treatment costs.  Your Health Insurance Broker can help you determine is your plan meets the minimum essential coverage.

Under the rules of the ACA, Affordable Rate refers exclusively to the employee contribution to the plan.  Coverage is considered "affordable" if employee contributions for employee only coverage do not exceed 9.5% of an employee's household income.  While you as an employer don't have access to the information on household income, there are three safe harbor methods for determining affordability under the ACA.

Full time employees are those regularly working at least 30 hours per week.  Coverage must also be offered to their dependent children, but not to their spouses.  There is no requirement to offer insurance to part time employees, those working less than 30 hours per week.

We have tools available to help you manage the status of your employees and to make the process as easy as possible.  If you have any questions, please contact us directly.