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Easy Record Keeping for ACA Compliance

08/17/2016

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As an employer, there are a few questions you need to ask yourself when deciding on a health plan for your employees. Health plans are required by law, and there are penalties if your company employer doesn’t provide health plans. 

Is our plan affordable to the lowest-paid employee?

Premium affordability thresholds are different for all employees. What may be affordable to an employee earning $100,000 may not be affordable to an employee earning $25,000. The safe harbor affordability guidelines suggest that the premium cost for employee-only coverage begin with not exceeding 9.66% of the monthly earnings of the lowest paid employee.

Does our plan provide the coverage required by the government? 

An Applicable Large Employer (ALE) is one who during the previous calendar year had at least 50 or more full-time and full-time equivalent employees. An ALE is required to offer minimum essential health coverage to its full-time employees that provides minimum value, covering at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.

How often does an employer have to pull this information? 

Though reporting under the Employer Shared Responsibility Provision is required annually, record keeping is a significant job for any-sized company. Employers should prepare for their annual reporting months in advance.

What’s the penalty price if an employer doesn’t provide health plans? 

There are two forms of Employer Shared Responsibility payments commonly referred to as A penalty and B penalty. The penalty price is dependent on the terms of minimum health coverage or no health coverage. If an ALE is subject to both types of penalties, the total amount of the B penalty cannot exceed the total amount of the A penalty.

Do we have the ability to track and report coverage and costs information for each employee?

This last question may be the toughest to answer, as you might have to pull data from payroll, Human Resources, time and attendance tracker, and/or benefit administration system. 

Tips about ACA Reporting Guidelines

The Affordable Care Act (ACA) is complex enough, and when you start getting into specifics like reporting guidelines, things can get even more convoluted. Because of the ACA’s complexity, it’s always a good idea to seek professional help when dealing with anything Obamacare related. What follows below are five key aspects that can help make sense of the intricacy of the ACA. 

Pay or Play

Surprisingly, under current ACA regulations, an employer is not actually required to offer health insurance to their employees. However, if an employer does not offer ACA-qualified health insurance, as well as pay a certain portion of the premium costs, then they may be faced with penalties. This is dubbed the “Pay or Play” requirement, because an employer may choose to “play” by offering qualifying coverage and paying the sufficient portion of the premium costs, or “pay” the penalty for not participating. 

Starting Point

A starting point for an employer would be to determine if they are even required to “Pay or Play” based on the number of employees during the prior calendar year. This is determined by the number of full-time employees and full-time equivalents — all employees are counted. A full-time employee consistently works 30 or more hours per week and is counted as one person (including part-time, seasonal and temporary full-time employees). All other non-full-time employees are counted and their aggregated total is divided by 120 — this is the full-time equivalency total. The full-time and the full-time equivalent totals are added together, and if greater than 50, then the employer qualifies as an Applicable Larger Employer and must choose to “Play or Pay.” Please note, that in this equation, there are specific guidelines on how to treat temporary and seasonal employees.  

Controlled Group

A controlled group is when two or more employers share common ownership and are treated as one employer under certain provisions. A controlled group can exist when a group of companies are under common control or owned by the same five or fewer common owners. When a company is a member of a controlled group of companies, the total number of full-time employees of each company are aggregated to determine Applicable Large Employer status — the number of each company’s employees are aggregated  together, and if the combined sum exceeds 50, then all companies must follow the “Pay or Play” requirement. On its own, a company may have less than 50 full-time and full-time equivalent employees, though being part of a controlled group can change a small employer to an applicable large employer. If you need assistance with controlled group determinations, a CPA or retirement plan administrator can help. 

Healthcare Coverage

When it comes to health insurance, coverage must be of minimum value, and the employee-only level of coverage must be considered affordable to your lowest paid employee, which means that the monthly premium should not exceed 9.66% of monthly income. Most fully-insured group plans now provide minimum value. An employer’s broker can assist in developing an employer premium contribution strategy that will meet the affordability requirements. An employer who makes the effort to provide health coverage to employees will avoid additional penalty expense by meeting the minimum value and affordability threshold. 

Temporary & Seasonal Employees

Currently, many employers do not offer coverage to temporary or seasonal employees, however, the ACA regulations do not offer an exception for these employees. If an employer is an applicable large employer and temporary or seasonal employees are hired on full-time, then they are included in the “Play or Pay” scenario — they should be offered coverage or penalties may apply. You can avoid these inclusions by hiring them on as part-time and keeping their hours under 30 per week.

With these five tips in mind, understanding the ACA’s reporting guidelines can be a little easier, though it always remains advisable to consult a professional, just to ensure that you are 100% compliant. At LBMC Employment Partners, Terri Mangrum and Cindy Tresider are our ACA gurus. Should you ever need assistance, please don’t hesitate to reach out!

LBMC Employment Partners can assist you with both data collection and form preparation, such as: 

  • Determining applicable large employer status 
  • Monthly tracking of full-time and full-time equivalent employees
  • Monthly tracking of ACA indicator codes 
  • Track relevant employee data, medical plan coverage status, and spouse/dependent date 
  • Plan affordability threshold based on client’s safe harbor usage
  • Produce Form 1094-C and 1095-C
  • Penalty support of unmerited employer penalties 

Contact us if you need help getting started!