For employers with 50 or more full-time employees (FTE), major medical insurance must be offered to all full-time employees and their dependents. This includes employees who work 30 hours of service or more per week and their dependents up to age 26. Hours of service include hours worked and hours that an employee is paid but does not work, such as vacation, holiday, illness or disability, jury duty and military duty.
When it comes to benefits requirements, keep the following in mind:
- Affordability – The employee portion of the premium for self-only coverage must be less than 9.65 percent of the employee’s W-2 income
- Minimum value requirements – The health plan must cover at least percent of the total allowed cost of of benefits
- Required Communication – Employers are required to provide notice about health insurance marketplaces to all new employees within 14 days of hire
- Benefits waiting periods – Keep enrollment waiting periods to 90 days or less.
- Summary of benefits and coverage – If your company offers major medical insurance benefits to its workforce, a summary of benefits and coverage must be provided to all major medical insurance applicants and enrollees before benefits enrollment or re-enrollment. The SBC must provide an accurate description of the benefits and coverage under the applicable plan or coverage.
- Keep track – Employers are responsible for keeping detailed records of employment status and hours worked by their employees. Tracking involves important details for full- and part-time employees issued by the federal government, including measurement periods and reassessment.
- COBRA notifications – If your company offers a group health plan, exiting employees must receive a COBRA notification that includes information about health insurance marketplaces
If your company doesn’t offer Affordable Care Act compliant health care coverage that meets the affordable and minimum-value standards to all full-time employees and their dependent children under the age of 26, it’s important to prepare for the potential amount your company may be fined.
To activate a shared-responsibility penalty, both triggers must occur:
Trigger 1: (at least one of these is true for your company):
- Your company doesn’t offer health care coverage to 95 percent of all full-time employees and their dependent children.
- Your company offers coverage that isn’t considered affordable.
- Your company offers coverage that doesn’t meet minimum value standards.
Trigger 2: At least one employee or their dependent child receives a subsidy through a federal or state insurance exchange to help offset the cost of purchasing health care coverage.
Penalties are as follows:
- $2,000 penalty per full-time employee – If an employer doesn’t offer any type of health care coverage to all of its full-time employees and their dependents, the employer is penalized a fee of $2,000 for each of its full-time employees, excluding the first 30, if at least one of their full-time employees qualifies for and receives a premium subsidy in the individual insurance market through a federal or state exchange.
- $3,000 penalty per full-time employee or dependent receiving a subsidy – If an employer offers coverage that is either unaffordable or doesn’t meet minimum value requirements, the employer is penalized $3,000 only for each full-time employee or dependent who purchases health care coverage in the individual market through a federal or state exchange and receives a premium subsidy.
Under the Affordable Care Act, employers with 50 or more full-time equivalent employees are required to submit informational reporting about their employee health care coverage to the IRS. To help businesses comply with this requirement, Aflac has outlined the details you need to know:
Who is required to submit informational reporting?
Applicable large employers (ALEs)
What does the reporting include?
- Section 6056 requires ALEs to submit IRS Form 1095-C (an employee statement) and Form 1094-C (a transmittal). The report should include the employer’s information, as well as information surrounding their benefits coverage options, and workforce demographics.
What is the deadline?
- Similar to the applicable W-2 reporting deadline, statements should be provided annually to employees by Jan. 31. Forms must be provided to the IRS by Feb. 28 (March 31 if filed electronically) for the previous calendar year.
Is my business an applicable large employer?
Applicable large employers (ALEs) are those with
50 or more full-time equivalent employees. To determine if your business is an ALE, you need to account for full-time (employees working 30 hours per week) and full-time equivalent employees.
- Divide the number of hours in a month for employees who are not full-time by 120.
- Add the number of full-time(average of 30 hour per week) employees.
To get a yearly number, the FTEs for 12 calendar months are averaged.
How do I submit the report?
- To satisfy the Section 6056 reporting requirements, ALEs are required to provide the IRS with Form 1094-C, which is the transmittal form, and Form 1095-C, which is the employee statement. A separate employee statement is required for each full-time employee, and a single transmittal may be used for all of the returns filed for the calendar year. Draft forms are expected to be available from the IRS as the reporting deadline approaches. Additionally, employers with 250 or more W-2s are required to submit the form electronically.
Can a third-party organization file the report?
- Yes, the law allows employers to use a third party to assist businesses with filing IRS reporting and providing statements to individuals insured by the health plan.
Is there a penalty for non-compliance?
- Currently, employers may face penalties for not filing informational reporting. However, the law explains that these fines may be waived for employers that do not file due to reasonable cause, or reduced for errors that are corrected in a timely manner that are not due to reasonable cause.
The Cadillac tax, scheduled to take effect in 2020, is equivalent to 40 percent of the cost of health coverage beyond a certain threshold, depending on the type of plan. It’s important to wait for further guidance as 2022 draws near – including the tax threshold amounts and other implementation details.