The ability to offer excellent healthcare to employees is a great benefit that can help attract top-notch talent. It does, however, come with some government regulations that can be problematic for your clients if they do not document their healthcare benefits accurately.
The Employer Shared Responsibility Provision
The Employer Shared Responsibility Provision under the Affordable Care Act (ACA) dictates the role an employer must play in providing health insurance to his or her employees. The number of full-time employees determines if an employer needs to provide health insurance or pay a fine.
The ACA’s employer mandate requires that businesses with 50 or more full-time or full-time-equivalent employees must provide healthcare coverage. A full-time employee is considered someone who works at least 30 hours per week or at least 130 hours per month for more than 120 days per year. This must be provided to at least 95% of their full-time employees and their dependents (up to the age of 26). These employers face a penalty if they don’t cooperate. For tax purposes, these numbers are calculated from the prior year.
This mandate does not apply to employers with 49 or fewer full-time employees or part time employees.
The ACA requires that adequate plans must have these essential benefits:
- Outpatient Care
- Emergency Room Care
- Inpatient/Hospitalization Care
- Maternity and Newborn Care—prenatal and postnatal.
- Prescription Drugs
- Rehabilitative Care and Devices
- Laboratory Services
- Preventive Care and Services
- Pediatric Care
Some other provisions to note:
- Spouses of employees are not considered dependents, and the ACA does not require employers to cover spouses of their employees.
- Employees aren’t required to purchase the insurance that is offered. In this case, the employer wouldn’t owe a fee because quality, affordable coverage was offered and denied.
- To be considered affordable, the healthcare coverage an employer offers cannot cost more than 9.56% of the employee’s household income. It is also required to have an average cost sharing of 60% (also referred to as “minimum value”). If the coverage is deemed unaffordable, employees may use the marketplace and the employer risks a fine.
- Fines for not complying with the ACA start at $2,000. A certified accountant will be able to guide your client through the intricacies of the provision.
- The Employer Shared Responsibility Payment is not tax deductible.
- Small business owners with 25 or fewer employees who pay an average salary of $50,000 may be eligible for a health insurance tax credit.
- Small Business Health Option Marketplace (SHOP) is a resource for small business to make sure they purchase a minimum value plan.
To make sure your employees are compliant with the law, it is important for them to carefully document their healthcare benefits and keep up with the ACA regulations as their company grows.
Healthcare Documentation and Compliance
If your clients are close to the threshold of 50 full-time employees, be sure they are aware of all of the requirements under the ACA as they add full-time employees. Once they exceed the threshold, they will be required to abide by the regulations listed.
You clients should check with their accountant to make sure they are compliant with the Employer Shared Responsibility Provision under the ACA. The accountant can help ensure they have proper documentation, which is vital when your clients prepare and file their taxes.