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Affordable Care Act (ACA) FAQ

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Affordable Care Act (ACA) FAQ

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What is an Applicable Large Employer (ALE)? Are you one?    <top>

If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions. The following table shows the requirements for ALEs in different situations:

Employers with 100+ full time equivalent employees in 2015 with a fully insured health plan Employer mandate penalties begin in 2015 for large employers with 100 or more full-time equivalent employees. Large employers are required, under Section 6056 of the tax code, to complete and submit one Transmittal Form (IRS Form 1094-C) and, for each employee, an Employee Statement (IRS Form 1095-C – top half only). It may help you to think of the 1094-C as similar to the W-3 (a transmittal form) and the 1095-C as similar to the W-2 (a separate return for each employee).
Employers with 50-99 full-time equivalent employees in 2015 with a fully insured health plan Even though the regulations provide transitional relief from the employer mandate penalties in 2015 for most midsized employers, these employers still are required to perform certain reporting tasks under Section 6056. Midsized employers must file a Section 6056 Transmittal (IRS Form 1094-C) to prove that the employer in fact meets the requirements for the transitional relief. As long as the transitional relief requirements are met, employer mandate penalties will not begin for these midsized employers until 2016. Midsized employers will also be required to file an Employee Statement (the top half of IRS Form 1095-C) for each employee annually, although some transitional relief may be available in the 2015 tax year for certain mid-sized employers.
Employers with 50+ full-time equivalent employees in 2015 with a self-insured health plan Employers with self-insured health plans are required to perform both the employer reporting requirements (Section 6056) and the insurer reporting requirements (Section 6055). So employers with a self-insured plan are required to complete both the top and bottom half of the IRS Form 1095-C. (The top half of the form includes the Section 6056 reporting information and the bottom half of the form includes the Section 6055 reporting information.) These employers are also required to complete the transmittal form (IRS Form 1094-C). This guide is only intended to cover the Section 6056 (employer) reporting requirements, not the Section 6055 (insurer) reporting requirements.

Who is a Full Time Employee?    <top>

For purposes of the employer shared responsibility provisions, a full-time employee is, for a calendar month, an employee employed on average at least 30 hours of service per week, or 130 hours of service per month.  

There are two methods for determining full-time employee status: 

    1. The monthly measurement method
      • Under the monthly measurement method, the employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month. 
    2. The look-back measurement method. 
      • Under the look-back measurement method, an employer may determine the status of an employee as a full-time employee during what is referred to as the stability period, based upon the hours of service of the employee in the preceding period, which is referred to as the measurement period.

Who is a Full Time Equivalent (FTE)? How do I determine a Full Time Employee?    <top>

An employer’s number of full-time equivalent employees (or part-time employees) is only relevant to determining whether an employer is an Applicable Large Employer (ALE).  An ALE need not offer minimum essential coverage to its part-time employees to avoid an employer shared responsibility payment or penalty.  A part-time employee’s receipt of the premium tax credit for purchasing coverage through the Marketplace cannot trigger an employer shared responsibility payment.

 An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

    1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
    2. Divide the total by 120.

What is a Measurement Period?    <top>

An employer determines each on-going employee’s full-time status by looking back at the “standard measurement period” (a defined time period between 3 and 12 consecutive calendar months, as chosen by the employer.) The employer has the flexibility to determine the months in which the standard measurement period starts and ends, provided that the determination must be made on a uniform and consistent basis for all employees in the same category. If the employer determines that an employee averaged at least 30 hours per week during the standard measurement period, then the employer treats the employee as Full-time during a subsequent “stability period,” regardless of the employee’s number of hours of service during the stability period, so long as he or she remains employed.

New employees whose hours are unpredictable, such as seasonal or variable hour, will have their status determined by looking over a period of time called a “initial measurement period,” which can be 3-12 months.

What is a stability Period?     <top>

The "hold period" during which those employees are locked into full-time or part-time status based on the hours of service during the standard measurement period, regardless of how many hours the individuals work during the stability period. This period must be at least six consecutive calendar months and no shorter than the employer’s elected standard measurement period. (For example, if the employer chose a 12 month standard measurement period, the stability period would also have to be 12 months

What is a Control Group?    <top>

A control group is a term used to group together businesses under a common ownership. For the purposes of the Affordable Care Act, the control group is used to help determine if a business is an ALE. Click here for more definitions on how to determine if a business is part of a control group for the purposes of the ACA.

What is Minimum Essential Coverage (MEC)?    <top>

The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage.

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/ACA-Individual-Shared-Responsibility-Provision-Minimum-Essential-Coverage

What is an affordable rate?    <top>

Coverage is considered “affordable” if employee contributions for employee only coverage do not exceed 9.5% of an employee’s household income. Since most employers do not know an employee’s household income, there are three safe harbors in place for determining affordability:

    1. W-2 Wages Safe Harbor – The amount the employee must contribute towards employee only coverage for a bronze level or higher plan does not exceed 9.5% of an employee’s W-2 wages (not reduced for salary reductions under a 401(k) plan or cafeteria plan).
    2. Rate of Pay Safe Harbor- The amount the employee must contribute towards employee only coverage for a bronze level or higher plan does not exceed 9.5% of an employee’s monthly wages. This may be calculated for hourly employees by taking the employee’s hourly rate and multiplying it by 130 hours per month. For salaried employees, you may simply use the employee’s regular salary.
    3. Federal Poverty Level Safe Harbor- The amount the employee must contribute towards employee only coverage for a bronze level or higher plan does not exceed 9.5% of the Federal Poverty Level for a single individual. As noted above, this amount is approximately $1100 per year.

What are the Certifications of Eligibility?    <top>

Certifications of Eligibility are qualifying offer methods or transition reliefs the IRS is requesting on the 1094-C. Click here to find out more about the different methods.

What are the Penalties?    <top>

There are 2 different types of penalties the IRS could assess for non compliance with the rules for ACA. The following table outlines the types of penalties:

  • 2015 - The Penalty for not offering minimum essential coverage (MEC) for 70% of employees
    • (Total Number of Employees - 80) x $2080.00 = Penalty Amount
    • Example (100 - 80) x $2080.00 = $41600.00
  • 2016 - The penalty for not offering minium essential coverage (MEC) for 94% of employees
    • (Total Number of Employees - 30) x $2160.00 = Penalty Amount
    • Example (100 - 30) x $2160.00 = $151200.00
  • 2015 - Penalty when at least the applicable percentage of employees is offered minimum essential coverage (MEC) but a full time employee receives a pemium tax credit because affordability or minimum value requirments were not fullfiled
    • Number of full time employees who received a premium tax credit x $3120.00 = Penalty
    • Example: 5 x $3120.00 = $15600.00
  • 2016 -  Penalty when at least the applicable percentage of employees is offered minimum essential coverage (MEC) but a full time employee receives a pemium tax credit because affordability or minimum value requirments were not fullfiled
    • Number of fill time employees who received a premium tax credit x $3240.00 = Penalty
    • Example: 5 X $3240.00 = $16200.00

What forms do I file?    <top>

  • 1094-C
    • Employers with fifty (50) or more full-time ( including full-time equivalent ) employees use Forms 1094-C and 1095-C to report the information required under sections 6055 and 6056, about offers of health coverage and enrollment in health coverage for their employees.

      Form 1094-C must be used to report to the IRS summary information for each employer and to transmit Forms 1095-C to the IRS.

      Click [HERE] to Preview the 1094C Form.

  • 1095-C
    • Employers with fifty (50) or more full-time ( including full-time equivalent ) employees use Forms 1094-C and 1095-C to report the information required under sections 6055 and 6056, about offers of health coverage and enrollment in health coverage for their employees.

      Form 1095-C is used to report information about each employee. In addition, Forms 1094-C and 1095-C are used in determining whether an employer owes a payment under the employer shared responsibility provisions under section 4980H. Form 1095-C is also used in determining the eligibility of employees for the premium tax credit.

      Employers that offer employer-sponsored self-insured coverage also use Form 1095-C to report information to the IRS and to employees about individuals who have minimum essential coverage under the employer plan and therefore are not liable for the individual shared responsibility payment for the months that they are covered under the plan.

      Click [HERE] to Preview the 1095C Form.

Who can help me out with ACA questions?    <top>

The following table outlines places you can go to find out additional information. Depending on the topic within ACA, one group would be better able to assist you over another.

Payville 

(When enrolled with our ACA Package)

Accountant

Plan Provider

Employer

Determine if you are an ALE

Control Group Status

Benefit Period Start and End Date

Measurement and Stability Period

Determine Full Time and Full Time Equivalent Employees

 

Health Care Plan Information

 

Determine Employee Eligibility, when you should offer an employee Insurance

 

Does my plan meet or exceed Minimum Essential Coverage (MEC)?

 

Handle 1094/1095C Forms

 

 

 


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Views: 497 Created on: Sep 21, 2015
Date updated: Sep 29, 2015
Posted in: Resource

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