Employers’ Top Five Questions About the ACA

Health care reformPaychex has identified these top five questions from business owners about the ACA; and has provided answers:
1. How do the Employer Shared Responsibility provisions affect a business that is part of a controlled group? A controlled group consists of two or more corporations under common control. There are several types of controlled groups including parent-child, brother-sister, and affiliated service groups, which are created based on common ownership/control. All employees in each entity in a controlled group are taken into account when determining whether the controlled group is an applicable large employer and subject to the Employer Shared Responsibility provisions. If these provisions do apply, each company within the controlled group will be looked at individually when calculating what payments or fees may apply, if any. Employers should consult with their legal or financial advisor to determine if they are in a controlled group.

2. What fees are associated with the Affordable Care Act and who is responsible for them?Business owners need to be aware of the Patient Centered Outcomes Research Institutes fee, the Health Insurance Industry fee, and the Transitional Reinsurance fee.

* The Transitional Reinsurance fee is charged to the health insurer for fully insured health plans and to plan sponsors for self-insured plans. (Effective since 2012 and continuing until 2019).

* The Health Insurance Industry fee is charged to health insurers. (Effective January 1, 2014.)

* The Transitional Reinsurance fee will be charged to health insurers and plan sponsors. They are allowed to pass along the fee to employees. (Effective January 1, 2014 and applicable until 2016).

3. How can a plan determine whether it meets the minimum value requirement of the Employer Shared Responsibility provisions? A plan that covers at least 60% of the total allowed cost of plan benefits is considered to provide minimum value. An HHS final rule, issued in February 2013, provides four approaches for plans to determine whether they meet the minimum value requirement:

I. Any plan in the small group market that meets any of the metal levels of coverage provides minimum value (Bronze, Silver, Gold, or Platinum).
II. CMS developed a calculator to determine a plan’s minimum value (http://www.cms.gov/cciio/resources/regulations-and-guidance/index.html.)
III. A plan can get an actuarial certification from a member of the American Academy of Actuaries.
IV. HHS and the IRS are developing checklists for employers to compare their plans’ coverage. If an employer’s plan is consistent with one of these checklists or more generous, the plan will be treated as providing minimum value.
Applicable large employers that do not provide minimum value health plans may be subject to an annualized penalty of $3,000 per affected employee.

4. How is the small business tax credit changing for 2014? For tax years beginning in 2014, the maximum credit will increase to 50% of small business employers’ contributions to health insurance. The maximum tax credit will increase to 35% for small business tax-exempt employers’ contributions. To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) marketplace. The credit will only be available for two consecutive taxable years.

5. How are a full-time employee and full-time equivalent employee defined under the Employer Shared Responsibility provisions? A full-time employee is employed an average of at least 30 hours per week or 130 hours in a calendar month. A full-time equivalent employee is a combination of employees who are counted as the equivalent of a full-time employee. Each of these employees is not employed, on average, at least 30 hours of service per week or 130 hours per month. To calculate the total number of employees in a calendar month, take the total hours worked by full-time equivalent employees during the month (capped at 120 hours for each employee) divide by 120, and add it to the total number of full-time employees.
For more information, visit http://www.paychex.com/health-reform.

Last Updated 11/18/2020

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