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.
The Questions and Answers provided here represent the latest guidance from the final rules issued February 10, 2014.
What constitutes a full-time employee?
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.
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?
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 final 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.” Transition Relief rule for employers with at least 50 but fewer than 100 full-time employees.
Employers with at least 50 but fewer than 100 full-time employees (including full-time equivalents) in 2015 were not subject to Employer Shared Responsibility if they met specific criteria.
Effective January 1, 2016, transition relief expires and all employers with 50 or more full-time employees (including full-time equivalents) will be subject to all Employer Shared Responsibility provisions. Please review RMHPs ALE overview
Who is entitled to health insurance coverage?
- 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.
How do I determine who is considered a full-time employee for purposes of offering health insurance coverage?
Final regulations provide two Measurement Methods
employers can use for different categories of employees.
Measurement methods provide a structured timeline using information about employees you employ to determine their full-time status. FAQs
from the IRS provide more detail on these Measurement Methods
How do I determine if a newly hired employee whose hours may be variable should be entitled to health insurance coverage?
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 Initial Measurement Period Method. to determine full-time status for the subsequent Stability Period (see above).
Are there any new reporting responsibilities?
Reporting Requirements have been postponed until 2015. The following information is based on these final regulations
Employers required to report certain health coverage information to the IRS and to furnish certain related employee statements to full-time employees. Employee Statements (Similar to a W-2)
First Statement Due:
- Provides specific information about the employer’s offer of health coverage
- Specific Form to complete (Form 1095-C*) Employers meeting specific criteria may use Alternative Method A.
- Can be mailed or sent electronically (with prior consent from employee)
- Must be furnished on or before January 31st following the calendar year for which the report is due.
February 1, 2016 (since 1/31/2016 falls on a Sunday
) *Self-Funded employers complete “entire” Form. Fully-insured employers complete certain portions only. Carrier provides remaining details through their reporting obligations. Transmittal Form Filing to IRS
- Provides aggregate employer-level data for all full-time employees
- Specific Transmittal Form to complete (Form 1094-C) Employers meeting specific criteria may use Alternative Method B.
- Must be sent electronically (if employer has 250 or more full-time employees, optional for employers with less than 250 full-time employees)
- Must be submitted to IRS on or before:
February 28 (paper submission) or March 31 (electronic submission) following the calendar year for which the report is due. First Statement Due:
March 1 or 31, 2016 (since 2/28/2016 falls on a Sunday
) Transmittal Form Filing to IRS (Form 1094-C) Data Elements:
- Name, address and employer identification number (EIN)
- Name and telephone number of ALE contact person
- Certification that MEC was offered to full-time employees/dependents
- Number of full-time employees each calendar month
- For each employee, the months MEC was available
- For each employee, the employee’s share of the lowest cost monthly premium for self-only coverage by calendar month
- Name, address and taxpayer identification number for each full-time employee and the months, if any, during which the employee was covered under an eligible employer-sponsored plan.
- Method A - Abbreviated Employee Statement (1095-C). Option to provide an abbreviated report to the IRS and short statement to employees if coverage is offered to a least 95 percent of employees. Note: only available for the 2015 calendar year.
- Method B - Abbreviated IRS Transmittal Form (1094-C). Option to Report without separate identification of full-time employees if 98% of employees are offered coverage.
- Method C - Option for Employers with 50-99 employees. Provide prescribed statement in lieu of completing IRS Transmittal Form (1094-C).