The “employer mandate” is one of the many provisions of the Affordable Care Act (ACA) that businesses should be planning for as we approach 2015. Many employers need to take immediate action to determine whether or not their business will be required to provide qualified health insurance benefits to their employees in 2015 or 2016.
Will your business be required to provide insurance in 2015 or 2016?
Employers with 100 or more full-time equivalent employees (FTE’s) will be required to provide health insurance in 2015, while employers with 50 to 99 employees will be required to provide health insurance beginning in 2016.
FTE’s are determined by adding all hours worked during the month by part-time employees (those working less than 120 hours) and then dividing that total by 120. The result is added to the number of full-time employees (those working at least 120 hours during the month) to determine the total number of FTE’s for the month. For determining 2015 requirements, employers will be required to evaluate the number of full-time employees during 2014. Likewise, 2016 status is determined by evaluating employment levels in 2015.
Beware: Related entities may be treated as a single employer
For companies with simple ownership structures, employee calculations should be fairly straightforward. Companies with related ownership will need to determine which entities should be considered as a single employer under the ACA. Many restaurants and real estate projects have different ownership groups, where ownership may be similar, though not identical, among several “related” entities. Under the ACA, calculation of the number of FTE’s is required to be determined for “controlled groups” of companies, meaning that certain related companies must be included together in a single calculation. Accurately determining the number of FTE’s for related entities may require changes to recordkeeping procedures.
Workers must be properly classified as employees versus sub-contractors
The proper classification of workers, already a high priority issue for the IRS and the Department of Labor, takes on even greater significance with the implementation of the employer mandate. While compliance with employment tax and Department of Labor rules should be sufficient motivation, the ACA’s employer mandate provides even greater incentive for employers to get employment classifications correct. An employer’s ability to correctly count FTE’s within their organization is dependent first upon their ability to distinguish employees from contractors. Employers should prioritize worker classification in 2014 and 2015.
Only a proactive approach will ensure compliance
Every employer should take a proactive approach to evaluating their requirements under the ACA. Determining the number of FTE’s within an organization based on 2014 calculations is just a start. Companies that are considered applicable large employers (100 or more FTE’s) must be prepared to provide qualified insurance coverage for full-time employees beginning Jan. 1, 2015 or be prepared to pay significant fines. Employers that are very close to the 100 FTE dividing line may want to have a plan in place for both possibilities. The same holds for employers with 50 to 99 employees in 2016. Potential tax implications of the ACA may also be considerable. Compliance will be simpler and tax and planning more effective when both are addressed proactively.
Who should be concerned about this upcoming requirement?
- Organizations that are near the 50 or 100 FTE cutoff and don’t currently provide insurance
- Employers well over the 100 FTE cutoff that don’t currently provide insurance
- Employers who do currently provide insurance, but are unsure if their plan qualifies
If you are unsure about your requirements under the ACA, call us to start planning today.