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ACA Will Dramatically Impact Employers With 50-99 Employees in 2016 08.21.2015

Since March of 2010 Applicable Large Employers (ALE’s) have been anticipating the impact of Affordable Care Act Implementation. After years of confusing regulations and delays January 1 2016 will bring about the most sweeping changes to employers with 50-99 full time equivalent employees.

Employers of this size tend to have limited internal HR resources and will be challenged to contend with the new landscape.   Many employers have tried to ignore the background noise hoping that these issues will go away.   Unfortunately at this point we are facing full implementation and the need to rely on competent professionals for guidance has never been stronger.

Most significantly, as of January 1, 2016 employers with 50 or more full time or full time equivalent employees will need to comply with the Employer Shared Responsibility aspect of the ACA.   This means that employers will need to offer all employees who work 30 hours a week or more quality affordable coverage.   This coverage must be offered no later than following 90 days of employment.

In order to make this comprehensible it is important to understand some key definitions and issues:

50 or more Employees

In determining if the regulations apply to, you must consider all entities with common ownership.   If you own a consulting company, a car wash and a bakery then all of the employees from each of the businesses must be aggregated together to see if you have over 50 employees.

A full time employee is defined as working 30 hours a week or more. Many employers have part time employees.   Employees working less than 30 hours per week must have their monthly hours totaled. This total is divided by 120 to determine full time equivalent employees. For Example:

Employer has 35 employees working 30 hours a week or more

Employer has 100 employees working an average 20 hours per week (to calculate full time equivalent employees add weekly average hours worked per employee and multiply by 4.2 and divide by 120)

50 employees x 20 hours/week x 4.2 /120 = 35 full time equivalent (FTE) employees

35 full time + the 35 full time equivalent = 70…this employer must comply as of 1/1/16 

There are complex rules that determine whether an employer is eligible for transitional relief (a delay until their renewal in 2016).   You will need to consult a benefits professional to determine if your specific circumstances provide for such relief.

Quality Coverage

Quality coverage is defined as coverage with an actuarial value of no less than 60%. This is the “Bronze Level” plans. The lowest level plans being offered by the insurance carriers.  

Affordable

Affordable means that the employee contribution is no more than 9.56% of the employees Box 1 W2 wages for single coverage for the employer’s lowest level plan offered.  

Penalties

For an employer that does not offer Minimum Essential Coverage (MEC) to at least 95% of its full time employees and at least one employee obtains coverage through the exchanges and receives a premium tax credit (subsidy) the penalty is $2000 times the total number of full time employees (minus 30).

For an employer who offers MEC coverage, but it is not quality or affordable and employees obtain coverage through the exchanges and qualify for tax subsidies, the penalty is $3000 for each employee receiving a tax subsidy.

ACA PENALTIES ARE NON-TAX DEDUCTIBLE. THIS MEANS THAT THEY ARE PAID WITH POST TAX DOLLARS WHICH HAS AN ECONOMIC IMPACT OF NEARLY DOUBLING THE COST DEPENDING ON BUSINESS OWNERS PERSONAL TAX RATES 

Reporting

On January 31, 2016 employers deemed 50+ will be responsible for reporting on Employer Provided Health Insurance Offer and Coverage Information based on plans and rates offered since January 1, 2015.   These reporting requirements bring rise to the most administratively burdensome regulations heaped on employers perhaps ever in history.   Prudent employers with 50 or more full time or full time equivalent employees have been gearing up to meet these requirements since early 2015. 

About the Author

Scott Rappoport is an Employee Benefits professional with more than 30 years of experience helping employers from 50-5000 employees manage the costs and complexities of their benefit program.   Scott is a Certified Employee Benefits Specialist (CEBS), a professional designation program offered through the Wharton School of Business of the University of Pennsylvania in conjunction with the International Federation of Employee Benefit Professionals. Scott is a Principal in Chadler Solutions where he directs the Employee Benefit, Retirement, Human Resource & Individual Insurance divisions. For more information on ACA Compliance and how these complex issues apply to your company, Scott can be reached at 732-595-2200 or This email address is being protected from spambots. You need JavaScript enabled to view it..

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