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ACA Penalties: Insurance Inadequacies Can Cost You

Offering employees health insurance is not enough to avoid the penalties associated with the shared responsibility requirements of the Affordable Care Act (ACA).  While many large employers already provide what they believe to be a good health plan for employees, the ACA has set the standard for what is considered adequate and affordable coverage as well as the penalties for non-compliance.

Health Insurance is considered inadequate if it pays less than 60 percent of covered health care expenses and unaffordable if employees have to pay more than 9.5 percent of their household income for single coverage. Since most employers do not have a way of tracking their employees’ household income, the IRS has provided employers a safe harbor whereby they will be considered as having met the insurance affordability obligation if the employee’s insurance is less than 9.5 percent of the employee’s Form W-2, Box 1 income.

In 2014, employees without adequate and affordable coverage can turn to a Health Insurance Marketplace, also known as an exchange, to find and compare private health insurance options. If even one of your employees elects coverage through the exchange, you could be fined an annual penalty of up to $3,000 per full-time employee, or $2,000 per total number of full-time employees (not counting the first 30 employees), whichever is less. The employee’s eligibility for the exchange is also dependent on the employee’s household income. Generally, those who make between 100 and 400 percent of the poverty level would qualify. For 2012, the poverty level was $23,050 for a family of four.

As you can see, for large employers simply providing insurance may not be enough to keep you ACA compliant. Something else to note is that even if you do provide adequate and affordable health insurance to your employees, the ACA and Fair Labor Standards Act (FLSA) still require you to notify employees of the coverage options for the Health Insurance Marketplace.

Sign up for our webinar – Think Your Business is ACA Compliant? – and read our ACA blog post on “Companies with Employer-Sponsored Health Plans Must Still Notify Employees of Exchanges” to learn more.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.



Author Bio: Newman Wells is a writer, designer and entrepreneur with over 20 years of corporate marketing experience. Passionate about B2B marketing, Newman Wells specializes in helping businesses define their value propositions by simplifying technical jargon for easier-to-digest messages that drive sales. She has spent the last two decades building successful marketing departments from the ground up and has been Paycom's director of marketing since 2005.

ACA Forms Unready Sign

Most Employers Still Unprepared for ACA Forms Mandate

Despite ongoing attempts to challenge the Affordable Care Act (ACA), the U.S. Supreme Court again upheld the law, so the employer mandate still stands and requirements remain. And yet, more than 65 percent of our “Easy ACA for Employers” webinar attendees said they were not ready to file and furnish their 2015 ACA Forms, even though they are required by the federal law.

Silver lining for employers

On Dec. 28, 2015, the IRS announced an extension for the ACA reporting requirements for businesses. Notice 2016-4 extended the original due date for Forms 1095-B and -C from Feb. 1 to March 31, 2016, and Forms 1094-B and -C from Feb. 29 to May 31, 2016. While employers are given extra time to comply, the IRS is ready and willing to accept forms, and businesses are encouraged to file and furnish them as soon as possible, even if that is before the deadline.

2016 changes

Many organizations are still trying to get their reporting needs straightened out, but businesses also should be prepared for a number of significant changes that will occur this year. In addition to the extension, there are three main changes with which employers should be familiar.

  1. All Applicable Large Employers (ALEs), with 50-plus full-time or full-time equivalent employees, must now pay or play. Although these organizations were given transitional relief in 2015, they must follow guidelines in 2016. They still are required to file and furnish the Forms 1094/95 -B or -C.
  2. ALEs now must offer health care coverage to 95 percent of their full-time employees. This percentage went up from 70 percent in 2015.
  3. For 2016, employers facing fines for employees who qualify for subsidies through the exchange will be fined after their first 30 employees, not 80 as the law stated in 2015. The annual penalties for failure to comply are up to $3,000 per full-time employee receiving the credit or subsidy, or $2,000 per total number of full-time employees, whichever is less.

One thing that remains is that the employer mandate is here to stay. Because the ACA is constantly evolving, it is important employers choose an HR software provider that is privy to the latest changes and can handle all of the ACA’s complexities.

 



Author Bio: A writer, speaker and young business leader, Jason has been the communications pulse for a number of organizations, including Paycom. A featured writer on human capital management technology, leadership and the Affordable Care Act, Jason launched Paycom’s blog and social media channels, helping empower organizations around the nation. Jason is attuned to the needs of businesses and recently helped develop a tool to aid organizations in their pursuit to comply with the ACA; one of the largest changes in healthcare the country has seen. While working in athletics for ESPN and FoxSports, Jason learned the importance of hard work and branding. In his free time he enjoys adventuring with his family, reading and exploring new areas to strengthen his business acumen.

judge and gavel for blog

Yet Another Case Challenging ACA Rejected by Court

Yet Another Case Challenging ACA Rejected by Court

The latest challenge against the Affordable Care Act (ACA) has been rejected after the U.S. Supreme Court refused to hear a case questioning the source of the law’s origins.

Matt Sissel, a Washington artist, contended that the law was unconstitutional because it was a revenue-raising measure that started in the U.S. Senate, as opposed to the House of Representatives as required by the U.S. Constitution’s Origination Clause.

On a technicality, some Democrats pushed back, stating the bill originated in the House when the legislation first focused on homebuyers’ credit for military members; later, that legislation became the ACA.

In a 2014 ruling, a three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled against Sissel. His request for a rehearing before a full panel of judges also was rejected. After the Supreme Court voted to uphold insurance premium subsidies under the ACA in the King v. Burwell case, many legal experts believed the chances of Sissel winning his case were slim.

What this means for employers

Despite numerous and continuing attempts to challenge the ACA, the law still stands. The ACA remains in full force and it does not appear that it will be repealed anytime soon. Employers should continue to track information, report and file as the government requires. For complete compliance, consider utilizing HCM software designed to handle all of the ACA’s complexities. Paycom’s Enhanced ACA solution is designed to add accuracy and simplicity to your ACA reporting tasks.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.



Author Bio: Barclay has over 20 years of experience working as a consultant. He has worked in the consulting practices of accounting firms Ernst & Young and Causey Demgen & Moore. Barclay joined Paycom in 2011 and is currently a Tax Research Analyst. Robbie is a graduate of Rhodes College in Memphis, Tenn.

ACA blog pic

How ACA Form Extension Affects Employees, Individual Mandate

For 2016, certain employers are required to provide employees with the IRS Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage,” in time for employees to file for their own tax purposes. Forms were required to be furnished to employees by Jan. 31 of the year following coverage; however, due to the recent form extension for employers, Forms 1095-C for 2015 will be delayed to some employees and, in most cases, subsequently not needed for individual tax returns.

What does this mean for employees?

For this transition year, most employees do not need to wait for the Form 1095-C in order to file income tax returns. If an individual and their family were covered for all of 2015, they would mark the full-year coverage box on their return. For those not covered for the full year, they may claim an exemption or make an individual shared responsibility payment.

Notice 2016-4 (pages 6-8) grants transitional relief to certain individuals who receive Forms 1095-B and -C after they have filed. Under this relief, employees may choose to use other forms of verification of coverage to avoid ACA penalties. In addition, the IRS will not require these individuals to amend their tax returns to reflect the information provided on the forms. However, individuals in need of premium tax credits or those applying for a coverage exemption may need to file amended returns.

What other documents qualify as proof?

The Form 1095-C lists individuals and dependents who enrolled in coverage and the length of time they were covered. Because Form 1095-C will not be available to some employees in time, other verifiable information can be used, including:

  • proof of insurance,
  • a summary of benefits,
  • a statement from the insurance issuer,
  • a W-2 or payroll statements showing health coverage deductions and
  • records of advance payments of the premium tax credit.

Despite the relief for employers, the IRS encourages early furnishing of reports to employees if possible. Issuing reports earlier than expected minimizes the disruption for employees filing their 2015 tax returns.

As for employees, don’t wait – file your tax returns using other documentation if possible.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.



Author Bio: Barclay has over 20 years of experience working as a consultant. He has worked in the consulting practices of accounting firms Ernst & Young and Causey Demgen & Moore. Barclay joined Paycom in 2011 and is currently a Tax Research Analyst. Robbie is a graduate of Rhodes College in Memphis, Tenn.

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