Under the Affordable Care Act (ACA) some employers, depending on the size of their workforce, are subject to the employer shared responsibility provisions. Many employers are below the workforce size boundary and are not affected by the employer shared responsibility provisions. Those above the workforce size boundary are referred to as Applicable Large Employers (ALEs).
If you are an ALE subject to the employer shared responsibility provisions, you can choose either to provide affordable minimum essential coverage that supplies marginal value to your full-time employees and their dependents, or owe an employer shared responsibility payment to the IRS. Many employers offer coverage that meets at least the minimum requirements to avoid owing a payment to the IRS.
Here’s some useful information for knowing and understanding the coverage requirements:
Minimum essential coverage: Minimum essential coverage means that the coverage provided must be affordable and of the minimum value as described below. For purposes of reporting by ALEs, minimum essential coverage shows insurance coverage under an employer-sponsored plan, which does not include fixed indemnity, life insurance, dental, or vision.
Affordable coverage: If the least expensive price self-only health plan is 9.5% or lower of your full-time employee’s family income, then the coverage is thought to be low-cost. However, employers will likely not know their employee’s household income. Employers can then use three measurements other than household income to determine the affordability of the coverage they are offering to their employees – W-2 wages, an employee’s rate of pay, or the federal poverty line.
Minimum value coverage: An employer-sponsored plan provides minimum value if it covers 60% or more of the total allowed cost of benefits expected to be incurred under the plan. Under current counsel, employers must use the minimum value calculator developed by the Department of Health and Human Services (HHS) to determine if a plan with standard features provides minimum value. Plans with nonstandard features must obtain an actuarial certification. The proposed regulation also describes certain safe harbor plan designs that will satisfy minimum value.
Keep in mind that aside from providing coverage to your employees and their dependents, you are also subject to reporting responsibilities. If you have not yet met these requirements in part or in full, the IRS is offering transition relief for certain circumstances. If you have further questions, visit the links provided or contact your CPA.
