What is the Health Care Reform Impact on my Business?
Beginning in 2015, large employers who meet the definition of an “Applicable Large Employer ” must offer affordable health care coverage to their full-time employees or be subject to financial penalties. RMHP can help our Large Employer groups understand the new Employer Shared Responsibilities and what they mean for your specific health plan.
Proposed regulations were slated to be effective in 2014, however the IRS announced on July 2, 2013 the rules for mandatory employer requirements and tax penalties have been postponed for one year. The delay of the Applicable Large Employer penalties and employer reporting requirements will limit the affordable care act (PPACA) business impact.
RMHP will provide updates as new guidance is issued.
The Questions and Answers provided here are flagged with the proposed effective date.
What constitutes a full-time employee?
Effective for plan years on or after January 1, 2014: Full-time employees work 30 hours or more a week, or 130 hours or more in a calendar month.
How do I calculate full-time equivalents (FTE)?
- If you have employees who work less than 30 hours, you will need to track their hours of service each month.
- Add their collective hours together for the month and then divide by 120. This will give you the full-time equivalent number.
- Here is an example: Employer X has 25 employees who each average 80 hours of service per month (20 hours/week)
- The 25 part-time employees are aggregated (25 x 80 hours) and divided by 120: (25 x 80 = 2,000 / 120 = 16.6)
- Employers are allowed to round “down” to the next lowest whole number
- Employer X has 16 FTEs (Full-Time Equivalents)
How do I determine if I am an Applicable Large Employer?
Reporting of group size postponed until 2015: If you add together the number of full-time employees and full-time equivalent employees, and the number is 51 or greater, you are an Applicable Large Employer.
The guidance provided in the proposed regulations published by the IRS provides this formula: “Calculate the number of full-time employees + the number of full-time equivalents (FTEs) for each month in the preceding calendar year and divide by 12.”
Who is entitled to health insurance coverage?
Effective for plan years on or after January 1, 2015:
- All full-time employees (30hrs or more/week)
- Dependent children* of the employee up to age 26 (includes adopted children, foster children and stepchildren). Coverage for spouses is not required.
*Dependent children coverage will be required in 2015. Employers may rely on employee’s representation regarding children and their ages.
How do I determine who is considered a full-time employee for purposes of offering health insurance coverage?
Measurement Periods used to determine full-time status and Reporting Requirements have been postponed until 2015. The following definition is based on proposed regulations and may change with final regulations.
Proposed regulations introduce Measurement Periods
that provide a structured timeline to determine whether or not an employee is to be treated as a full-time employee.
Measurement periods are conducted using information about employees you employ during the prior year to determine their full-time status for the following year.
The following Measurement Periods will become part of the Human Resource functions going forward.
Standard (Look-Back) Measurement Period
– A time period of at least three but no more than 12 consecutive months. This measurement period is used to determine the average number of hours employees work per week. The determination made during this period will drive which employees must be offered health benefits during the future Stability Period. Initial Measurement Period
– A time period of at least three but no more than 12 consecutive months for new employees. This measurement period is similar to the Standard Look-Back Measurement Period and is used to determine the number of hours new employees work per week.
It is important to note that if a newly hired employee is “reasonably” expected to work 30 hours or more per week, that employee must be offered group health coverage following your new hire waiting period
. Administrative Period
- Optional period selected by employer of no longer than 90 days, to begin immediately after the end of measurement period, and ending immediately before the Stability Period.
During this period the company determines full-time employees, and notifies and enrolls those employees. Stability Period
- Follows the Standard/Initial Measurement Period and optional Administrative periods. The Stability Period is the time period in which benefits are administered. This Stability period is the time when the employer actively administers the group health plan to the now-determined full-time employees.
The Stability Period is the period reported to the Treasury and IRS.
How do I determine if a newly hired employee whose hours may be variable should be entitled to health insurance coverage?
Measurement Periods used to determine full-time status and Reporting Requirements have been postponed until 2015. The following information is based on proposed regulations and may change with final regulations.
If you cannot reasonably expect the newly hired employee to work on average 30 hours or more per week, you are not obligated to offer coverage.
You will need to start monitoring their hours through the Standard Look Back Period for the following plan year (see above).
Are there any new reporting responsibilities?
Reporting Requirements have been postponed until 2015. The following information is based on proposed regulations and may change with final regulations.
- Large Employers will be required to provide detailed reports to the IRS on all full-time employees and what coverage, if any was available to them during the prior year.
We expect to learn more about the reporting requirements and the Health Care Reform impact on business as final regulations continue to be released. Here are some details available today:
Reports to IRS:
- Employer group name and EIN
- Date return is filed
- Certification that minimum coverage is offered and all full-time employees have the opportunity to enroll
- Duration of any waiting period
- Months during the year when coverage under the plan was available
- Monthly premium for the lowest cost option in each enrollment category of the plan
- Employer’s share of the total allowed costs of benefits provided under the plan (must be at least 60% to qualify as minimum coverage)
- Number of full-time employees for each month of the calendar year
- For each full-time employee
- Name, address and taxpayer ID (TIN)
- Months during which employee was covered under the plan
- Such other info as may be required