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With the launch of tax season, employers are asking a flood of questions about mandates in the Affordable Care Act (ACA aka ObamaCare ) and whether they are understanding the choices that are available.
The Employer Shared Responsibility provisions became effective January 1st of 2015. No Employer Shared Responsibility payments will be assessed for 2014, but employers are expected to use their 2014 number of employees and their hours of service to determine whether they are subject to the payments in 2015.
Businesses in 2015 employing generally 50 full-time employees, or a combination of full-time and part-time employees that is equivalent to 50 full-time employees, will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code. The IRS defines a full-time employee as an individual employed on average at least 30 hours of service per week.
The IRS says, “Under the Employer Shared Responsibility provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents), the employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called a Health Insurance Marketplace (Marketplace).”
New Questions
One of the many issues that employers are asking about has to do with acceptable alternatives to providing a company health insurance plan for employees.
Some businesses are asking if reimbursements to employees for premiums those employees may pay for health insurance (whether it is purchased through the ACA Marketplace or outside the Marketplace) is enough to meet regulations. The IRS says an employer payment plan generally does NOT include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in case compensation.
Here is an IRS which provides a question and answer section on this issue:
“Q1. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?
Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.
Q2. Where can I get more information?
On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.
The Department Labor (DOL) has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03. On Jan. 24, 2013, DOL and HHS issued FAQs that address the application of the Affordable Care Act to HRAs. On Nov. 6, 2014, DOL issued additional FAQs that address the application of the Affordable Care Act to HRAs and other payment arrangements.”
There are a number of questions related to the ACA you may have, whether you employ 3 or 300 or 30,000 workers. Answers depend upon a number of factors and can have a number of financial consequences. Contact us at McRuer CPAs for a session with one of our tax experts to help you have confidence the decisions you make will be the best for the bottom line of your business.
