Affordable Care Act-What Can You Do Now?

Washington Monument November 2013, Karen Urcia, Senior Manager, Renner and Company, CPA, P.C.
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On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act, which is often referred to as Obamacare.  The goal of the Affordable Care Act (ACA) is to provide affordable health insurance to all US citizens and residents.  Starting January 1, 2014, all Americans will be required to have minimum essential health coverage or face a penalty.  As an employer, there are some provisions and action items that you need to be aware of.

Small Employer Health Insurance Credit If you are a small tax-exempt employer and are already offering health insurance, you may be eligible to receive a tax credit up to 25% of premiums paid toward health insurance coverage for 2013.  This credit can be taken on Form 990-T.  For 2014 and 2015, the maximum credit is 35% if the employer participates in a state insurance exchange through the Small Business Health Options Program (SHOP).

An eligible small employer is an employer:

  • with less than 25 full-time equivalent employees (FTEs) for the year, and
  • with average annual wages for the tax year less than $50,000 per FTE, and
  • who contributes 50% of more toward employees’ self-only premium costs.

You can determine the amount of your organization’s credit by using IRS Form 8941.

Small Business Health Options Program (SHOP) If your organization has 50 or fewer employees, you are not required to offer health coverage.  However, if you are considering offering insurance to your employees or if you are thinking of switching your existing insurance plan, you may consider plans from the Small Business Health Options Program (SHOP) to offer coverage to employees.  In 2016, SHOPs will be open to employers with up to 100 FTEs.  You can learn more about SHOP by visiting the following website:

https://www.healthcare.gov/marketplace/shop/.

Health Insurance Benefits Costs Reporting Requirement on W-2 Employers who filed 250 or more Forms W-2 during the preceding year are now required to report the health insurance costs on W-2s.  These employers need to start accumulating health insurance costs by employee.  The W-2 should include the value of the employee’s health insurance coverage paid for by the employer (including COBRA payments), and employer contributions to a Flexible Spending Account.  If you are required to report this on your W-2s, you should work with your payroll company to make sure you have all the information for the upcoming reporting season.

Limit on Flexible Spending Accounts Employees may choose to defer wages into a health care flexible spending account (Health FSA) before tax.  For 2013, the maximum contribution to a Health FSA is $2,500.  If your existing cafeteria plan allows for more than $2,500 deferral, it must be amended now.

Large Employer Mandate Applicable large employers will be required to pay penalties if they do not provide adequate coverage for their employees.  A one-year delay was announced in July 2013 to postpone the mandate penalties until 2015.  A large employer is an employer who employed an average of at least 50 full-time equivalent (FTE) employees during the preceding calendar year.  Large employers have to offer insurance for all full-time employees and must pay at least 60% of the cost.  In addition, the cost of the plan must be less than 9.5% of the employee’s household income.  If you are an applicable large employer, this is the time to compare your exiting health care benefits to the required coverage and estimate any additional future cost and possible penalty for noncompliance.

If your organization has different related companies, for example, a 501(c)(3) arm, a 501(c)(6) arm, and a for-profit entity, the combined number of employees will be used to determine if you are an applicable large employer.

There has been a lot of focus in the news on the Affordable Care Act and the rollout of HealthCare.gov lately.  The bottom line is that all individuals are required to have health coverage in 2014.  As an employer, whether you are offering health insurance coverage or not, you are required to provide a notice to your employees regarding health care options available under the Affordable Care Act.  Model notices can be obtained from the Department of Labor website at www.dol.gov/ebsa.healthreform.  Other notable websites to visit: the official health care website at https://www.healthcare.gov, and the Henry J. Kaiser Family Foundation, which offers a subsidy calculator at, http://kff.org/interactive/subsidy-calculator/.

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