Column 64 Clock is ticking for 100 Employee Groups!

It's time for businesses with 100 or more employees to prepare for compliance with the Affordable Care Act (ACA). This is part of the law, also known as "Obamacare" that requires that employers with 100 or more employees are required to offer health insurance coverage in 2015.  If your firm does not offer benefits, It is time to go shopping!

If you do offer coverage and your plan is not on a calendar year anniversary you need to pay attention to the new rules. The IRS states: for any calendar month in 2015 or any calendar month in 2016 that falls within an employer's non-calendar 2015 plan year, if an applicable large employer with at least 100 full-time employees (including full-time equivalents) does not offer coverage to at least 70% of its full-time employees (and their dependents), it owes an Employer Shared Responsibility payment equal to the number of full-time employees the employer employed for the month (minus 80) multiplied by 1/12 of $2,000, provided that at least one full-time employee receives a premium tax credit for that month.

According to the IRS, an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week. Under the final regulations, 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week.

It gets more complicated when the employer has employees who work variable hour schedules or  seasonal employees, but there are instructions provided for the determination process. 

You must determine how many employees or what percentage of employees are offered coverage, to determine if you are subject to the penalty or "Shared Responsibility Payment".  Employers must offer coverage to 95% of eligible employees beginning in 2016, but only 70% in 2015.

It is important to note that the coverage must be "affordable".  There are three safe harbors to calculate "affordability".  The easiest is to determine if the employee's share of premium for self-only coverage does not exceed 9.5% of W2 income from that employer.  This is Box 1 of the employee's Form W-2. In addition the plan must provide minimum value as defined by the ACA. 

Also coverage must meet minimum value standards. There is a minimum value calculator available from the IRS, but most brokers can advise if the plan meets the standard.

So what is the next step for an employer with 100 employees? 

First prepare a detailed census for active employees, including date of birth, hire date, hours worked and compensation.  It would be helpful to be able to look at the last year's data if some of the employees' eligibility is questionable.

If dependent coverage is to be offered, you will need to obtain dates of birth for all eligible dependents as well.

Compile this information and meet with your broker to discuss the next steps.  Your broker will prepare a Request for Proposal (RFP) and go to multiple insurers to obtain quotes for coverage.  They will ask you if there are any known pregnancies in your group and if there any known serious conditions or pending large claims.

The Health Insurance Portability and Accountability Act (HIPAA) is a complicated law that includes privacy protections for insureds.  So you may not have any of this information regarding your employees.  You are only asked to provide it "to the best of your knowledge" and of course without disclosing an individual's name, should you know about the issue.

When your broker reports to you, you will choose a plan (or maybe more than one) to offer to your employees. Next week we will explain the presentation and enrollment process.

If the employer is close to the 100 threshold and does not want to provide benefits, they will likely want to perform the "pay or play" calculation.  It's possible that it will cost less to simply pay the fine, rather than offer benefits.


Note: All information in this column is provided" to the best of my knowledge" subject to final regulation by the respective agencies.