Large employers-the Employer Mandate!

Whats is a large employer?

An employer is subject to Employer Shared Responsibility ( pay or play) if it averaged a combination of full time employees (including seasonal employees) and full time equivalents that equals at least 50.

For detailed explanation go to: http://business.usa.gov/sites/default/files/Calculating%20FTEs%20for%20businessUSA.pdf

However, as you likely are aware, Employer Mandate provision of the Affordable Care Act (ACA) has been delayed for one year. When it’s implemented in 2015, the Employer Mandate will require most employers with 50 or more full-time employees to offer ACA-compliant health insurance coverage to those employees, and to their eligible dependents. If the employers do not do so, they will be subject to a tax payment called the Employer Shared Responsibility Payment (ESRP).

Employer Penalties

Employer penalties for not offering coverage or providing unaffordable coverage to full-time employees mean certain employers are subject to the employer responsibility provision under the ACA. Under this provision, such employers may be penalized for (1) not providing minimum essential coverage to their full-time employees and dependents, or (2) not providing coverage that is affordable and that provides minimum value.
When does the employer responsibility provision take effect?

• It is effective beginning January 1, 2014. However, the regulators have announced transitional relief for the first year. This provision will not be enforced until 2015.

What is an employer for purposes of these penalties?
• An employer subject to the employer responsibility provisions is an “applicable large employer”. An applicable large employer employs on average at least 50 full-time employees (including full-time equivalents) during the preceding calendar year. The determination of whether an employer is an applicable large employer is determined across an employer’s controlled group.
• Under the proposed rules, transitional relief has been provided for purposes of the applicable large employer determination for the 2014 calendar year allowing employers the option to determine their status by reference to a period of at least 6 consecutive calendar months in the 2013 calendar year. Final rules or further guidance may clarify whether the regulators intend to continue this transition relief.
Are there special rules for determining an employer’s status as an applicable large employer if the employer employs seasonal employees?
• An employer will not be considered to employ more than 50 full-time employees if (a) its workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year, and (b) the employees in excess of 50 employed during the 120-day period were seasonal workers.
Who is counted as a full-time employee and a full-time equivalent employee?
• A full-time employee is one who works an average of at least 30 hours per week.
All employees who were not full-time employees for any month in the preceding calendar year are included in calculating the employer’s full time employees for that month (including part-time employees, and seasonal employees except seasonal employees are excluded if the special rule discussed above is met). To determine the total number of full-time equivalent employees, the employer must add together the hours of service for employees who were not full-time employees (but not more than 120 hours of service for any employee) and divide the total number of hours of service by 120.
• The proposed rules detail the rules for determination of “full-time” employee status and how employers must count hours of service.

Do these penalties apply to employers employing part-time employees?

• Part-time employees (those that work on average less than 30 hours per week) are counted as full-time equivalent employees for purposes of determining whether an employer is a large employer subject to these penalties. However, part-time employees are not counted for purposes of calculating the actual penalty amount. An employer will not pay a penalty for a part-time employee, even if that employee receives subsidized coverage through an Exchange.

What is the penalty for not offering minimum essential coverage?

• If an applicable large employer does not offer minimum essential coverage to its full-time employees (and their dependents), the employer will be subject to a monthly penalty if any full-time employee receives subsidized coverage through an exchange. Generally, an employee may qualify for subsidized coverage through an exchange if his or her household income is less than 400 percent of the Federal Poverty Level (currently, that level is set at $88,200 per year for a family of four and $43,320 for an individual).
• The penalty for not offering coverage is generally equal to $2,000 for each full-time employee, not counting the first 30 full-time employees. Only full-time employees (not full-time equivalents) are counted for purposes of calculating the penalty. After 2014, the penalty amount may be indexed.
• The proposed rule allows an employer to satisfy the requirement to offer minimum essential coverage if the employer offers coverage to “substantially all” of its full-time employees (and their dependents), meaning it has offered coverage to 95 percent of its full-time employees and their dependents (or, if greater, to five employees). This does not alleviate the potential liability under the affordability prong, discussed below, to the extent one of the 5 percent not offered coverage receives subsidized coverage on the exchange.

What is the penalty for providing minimum essential coverage that is not affordable?

• If an applicable large employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, the employer may be subject to a penalty if the employer-sponsored coverage does not provide “minimum value” or is “unaffordable” and one or more full-time employees receive subsidized coverage through an exchange.
• Generally, employees who are eligible for employer-sponsored coverage are not eligible to receive subsidized coverage through an exchange.
However, an employee may qualify for subsidized coverage through an exchange if his or her household income is less than 400 percent of the Federal Poverty Level (currently, that level is set at $88,200 per year for a family of four and $43,320 for an individual) and (a) the employer does not pay at least 60 percent of the allowed costs under the employer-sponsored plan (the coverage does not provide “minimum value), or (b) the employee’s required contribution for coverage exceeds 9.5 percent of the employee’s household income (the coverage is “unaffordable”).
• The penalty for not offering coverage that is affordable or that provides minimum value is generally equal to $3,000 for each full-time employee receiving subsidized coverage through an exchange.
However, the penalty will not be greater than the penalty that would apply if the employer offered no coverage at all. Only full-time employees (not full-time equivalents) are counted for purposes of calculating the penalty. After 2014, the penalty amount may be indexed.

How are dependents defined for purposes of the employer responsibility provision?

• Under the proposed rule on employer responsibility, the term “dependent” is defined to mean a child of an employee who is under age 26.(Spouses are NOT included)

Are there transitional rules related to the offer of dependent coverage?

• Yes, under the proposed rules, if an employer does not offer dependent coverage currently, it will not be liable under the employer responsibility provision in 2014 so long as the employer takes steps during 2014 to begin offering such coverage. Final rules or further guidance may clarify whether the regulators intend to continue this transition relief.

Remember that any employer can use any qualified insurance agent/broker to assist them in advising , finding and enrolling employees for suitable qualified health insurance plans whether on or off the state/federal marketplaces/exchanges!

Better and more or less qualified plans( depending on the employer’s requirements) might be available on the private marketplaces/exchanges which also will be in operation.

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