The Affordable Care Act (ACA) was signed by President Obama in March 2010, with the intention of putting consumers back in charge of their health care. The ACA aims to make healthcare more affordable, accessible, and of a higher quality for families, seniors, businesses and taxpayers, regardless of previous insurance history. Incremental changes have been made each year to implement the ACA, and the upcoming year brings about new IRS reporting requirements that affect employers.

Who is Covered?

First things first, all employers need to determine how many full-time, or full-time equivalent employees (FTE) they employ. An employee is considered full-time if he or she works on average at least 30 hours per week or 130 hours per month. Click here to determine how to calculate the number of FTE employees you have in your business.

Employers are required to extend an employee’s coverage to include dependent children under the age of 26.

Am I a large or small employer?

When you have calculated the number of FTE employees in your business, you can define yourself as either a large or small employer. There are different requirements for small and large employers.

  • Small employers employ between 2 and 50 FTE employees.
  • Large employers employ more than 50 FTE employees.

Small Employer

Small employers looking to provide coverage for their employees can do so through the Small Business Health Options Program (SHOP), which is part of the marketplace exchange. SHOP offers small employers increased purchasing power to provide a better choice of high-quality coverage to employees. SHOP also pools risk for small groups and reduces administrative complexity, therefore helping to reduce costs. Enrollment in SHOP is offered anytime during the year.

Disclosure to Employees

Employers must provide employees with an annual standard “Summary of Benefits and Coverage” form explaining what their plan covers and what it costs. This form will help employees to understand and evaluate their health insurance options.

Reporting Requirements

Beginning in January 2016, small employers must report health insurance information to the IRS annually, as well as providing “Summary of Benefits and Coverage” forms to employees.

Small employers must complete and file Forms 1095-B (Health coverage) and 1094-B (Accompanying transmittal form) with the IRS by February 29, 2016. Or, by March 31, 2016, if submitted electronically. Employees must also receive a copy of form 1095-B for tax purposes by January 31st, 2016.

Note: Small employers that are members of controlled or affiliated service groups that have at least 50 FTE’s collectively, must also submit Forms 1095-C and 1094-C.

For small employers with less than 25 employees and average wages of less than $50,000, who provide health insurance will be eligible for tax credits of up to 50%.

Large Employer

In 2015, large employers were only required to provide health insurance to their full-time employees and their dependents, if they had 100 or more FTE employees. Beginning in January 2016, all large employers must provide full-time employees and their dependents, with access to affordable comprehensive coverage.

The Employer Shared Responsibility Provision of the ACA will penalize employers if they do not offer affordable coverage. If at least one full-time employee receives a premium tax credit or cost-sharing subsidy in the federal or state marketplace, the employer will be penalized $2,160 for each month, divided by 12, multiplied by the number of full-time employees (minus the first 30 employees).

Click here to view the image.

What is affordable coverage?

  • Employees shouldn’t have to pay more than 9.66% of their household income for healthcare coverage provided by their employer
  • Insurance coverage should pay for at least 60% of the covered health care expenses for a standard population

The penalty for employers who are not providing affordable insurance coverage is $3,240 divided by 12, for each full-time employee receiving a premium tax credit that month (up to a maximum of $2,160 for each month, divided by 12 multiplied by the number of full-time employees (minus the first 30 employees)).

Click here to view the image.

Disclosure to Employees

Employers must provide employees with an annual standard “Summary of Benefits and Coverage” form explaining what their plan covers and what it costs. This form will help employees to understand and evaluate their health insurance options.

Reporting Requirements

Beginning in January 2016, large employers must report health insurance information to the IRS for all employees enrolled in the employer’s health plan, as well as providing “Summary of Benefits and Coverage” forms to employees.

Large employers must complete and file forms 1095-C (Employer provided health insurance offer and coverage) and 1094-C (Accompanying transmittal form) with the IRS by February 29, 2016. Or, by March 31, 2016, if submitted electronically. Employees, covered by the employer’s health plan, must also receive a copy of form 1095-C for tax purposes by January 31st, 2016.

Large employers who offer unaffordable coverage to employees, that costs more than 9.66% of their household income, will be exposed to non-deductible taxes for every employee who receives a tax credit subsidy to purchase health care on a public exchange.

For more information relating to the ACA click here.