Everything You Need to Know About ACA Compliance in 2016

ACA ComplianceI know the chances that this article’s readers are probably not reading this as a bedtime story or “just for fun”. But as dry as understanding the ACA mandate can be, it is important to embrace it with both hands… that way your hands will be tied and you won’t have to worry about hurting anyone!  I have seen many things improve as a result of the mandate, but have also seen individuals and businesses be impacted from negligence to compliance regulations. I am going to take you down the delightful trail of “Everything You Need to Know About the ACA Mandate”! Buckle up, all extremities in the cart, and we’re off!

Large Businesses and Midsize Businesses (who may be larger than they think)

On our first stop, we will explore the changes pertaining to employers. There have been continuing changes since the mandate was first introduced, so let’s make sure you are up to speed.

What does ACA compliance mean for your business?

It has been required for businesses with 100 or more full-time employees to offer health care benefits to their employees. Now, if your business has 50 or more full-time equivalents (FTE) based off the prior year’s numbers, then your business is now considered an ALE – Applicable Large Employer (and you have to offer health coverage!). Before you get too excited, let me explain. An employee that works more than 30 hours a week is considered a full-time employee. The mandate has created a formula to merge your part-time staff and combine them to make full-time equivalents. For example: Say you have a total of 80 employees on the payroll. You have 30 full-time employees who work 30+ hours a week.  The rest are part-time and (for easy math) all work 15 hours a week.  Those part-time employees are paired together to create full-time equivalents, and would add another 25 full-time employees to your tally. So your business would be considered an ALE, with 55 FTE. This change in the definition has confused many employers and caused them to pay noncompliance fines—which we will get into in another section.

If you are a business owner who has been deemed a large employer, chances are you have organized yourself to handle the compliance paperwork and have probably issued your 1095 tax forms to your employees. If you are a small business, and are thinking of growth, keep this formula in mind with regard to your business size. If you have not already, start tracking your employees on payroll each month and their average hours. It will be a much smoother transition during your growth period to start the reporting organization now.

Uh oh, there is a sharp twist and a steep drop ahead, hold on tight!

Is your offering Affordable?

So you have decided on an insurance plan, and benefits package to offer your employees…and it seems to be the best value to you. How do you know if it is considered affordable to your employees? Surprise, there is another formula for that! Bear in mind, you are offering the benefits to your full- time employees only.  The chosen plan will pass the affordability test if the employee’s required contribution for self-only coverage does not exceed 9.66 percent of the employee’s household income for the year. Let me provide another handy example. In Florida, the minimum wage is $8.05/hour. If your lowest paid employee makes $8.05/hour and works 40 hours a week, the employee’s “Safe Harbor” salary amount (the threshold amount requiring affordable coverage) is $16,744. Multiply that by 9.66% to find that the maximum amount this employee can pay towards their health insurance is $1,617 a year, or $135 a month. When looking at your employee premiums for the health benefit, make sure that their contribution is that or less. Have I lost you yet?

I almost see the end of the ride….

How does this impact my bottom-line?

I hear the voices in your head overwhelmed with new rules, and wondering what you think you will have to re-arrange in your budget to accommodate these new standards. If we can just take a moment of peace, and really look at the broad picture, I think it may all fall into place.

Non-compliance can cost you. Honestly, it can cost you more for defiance of compliance than to embrace the value of offering a benefits package to your employees. You thought you were reading an article, not solving math problems…but, I have another formula for you! You are a large employer with 75 full-time employees. You have decided you are above the law, and fail to offer health insurance to your employees. One of your employees goes to the marketplace to get a subsidy, and fills out that their employer does not offer health benefits. You are going to get slapped with a $96,300 fine for failure to offer coverage! We have arrived at this total by taking your 75 employees minus 30 (the government’s grace) multiplied by $2,140. Ouch!  Moral of the story, in the “pay or play” ballgame… play nice, and by the rules…it’s better than the consequences.

One last twist and round-a-bout..

When choosing what plan to offer for your benefits package, there are guidelines as to what is deemed Minimum Value or Minimum Essential Coverage. Most plans that the carriers now offer are considered a qualified plan. A quick way to ensure your plan is qualified is to see if a metal tier of Bronze, Silver, Gold or Platinum labels the plan. The tiers stand for the level of cost sharing or actuarial value that increases from Bronze to Platinum. A Bronze level plan is a very basic plan with minimal benefits, whereas a Platinum plan is a benefit rich plan with very low deductibles and copays. There are plans that can be offered that cover just preventative care on  the most basic level of benefits-called a “MEC” plan. They are a non-traditional form of health insurance, and you aren’t completely safe from the penalties. It’s a dicey solution to the reform, as you comply with Part A of the mandate, but are at risk of the Part B compliance fine. Let me circle you back around to the last example.  You have 75 full-time employees and offer a MEC plan to those employees. One of them receives a subsidy from the marketplace because the MEC plan that you offered him doesn’t meet the Minimum Value Requirements. Because he is now disgruntled, he runs and tells his best friend, who tells her best friend, etc…and before you know it, 15 employees have gone to the marketplace to receive a subsidy. For each of the 15 employees receiving that subsidy, you are now fined $3,240 – totaling $48,600. Not to mention, the costs associated for offing the plan combined with the fine, are probably more expensive than just offering a qualified health plan from the start. While we are talking about the worth of a health plan, have you considered how the offering helps in retaining valuable employees and what that means for your company?

As we are entering back into the loading zone, may I remind you to remain seated, buckled in until a complete stop, and check under your seat for any stray belongings.

Final Frontier

Now that you know the twists and turns, (and all the formulas) in regards to the mandate, I hope you feel confident in your business, and the upcoming choices you will be making on your health benefit offerings. I will leave you with a bullet point list of 5 reasons why offering benefits to your employees enhances your company:

  • Better employee morale– Showing you care about your employees, helps them to be more invested and loyal.
  • Healthier employees– More likelihood that with benefits, employees are taking advantage of their check-ups, and preventative steps.
  • Better job performance– Because employees are happy and healthy, they are not taking off sick days, and care about their team and productivity.
  • Minimize your turnover rate– Employees feel valued, and are dedicated to stay at a place where they are happy.
  • Increase your company appeal– Because your employees are happy, healthy & loyal, word will travel that your company is the place to be!

Food for thought!

I know I had a delightful ride, and hope you shared the same!

Stay tuned for my next post on “What The Mandate Means For Individuals”.

Kim Kato | Employee Benefits Advisor
kkato@w3ins.com | 727-522-7777 ext 285

What Do 1095 Forms Mean to Your Business?

What do 1095 Forms Mean to Your Business?The 1095 forms are a brand new tax form implemented in 2016 that your employees will need to file their taxes. This form goes hand in hand with the Affordable Care Act (ACA) and its requirement to carry health insurance. The 1095 provides the IRS with information needed to validate whether employees and employers have satisfied the requirements of the ACA. It is considered your “Proof of Insurance”.

There are three different versions of 1095 that you need to be aware of:

  • 1095-A: This is a form that is provided to all individuals who purchased coverage through the ACA marketplace.
  • 1095-B: This version is the form filed and mailed by the insurance carrier. All insurance carriers are required to send this form to their insureds.
  • 1095-C: This 1095-C is the form that all employers with 50 or more employees need to complete and send to all of their employees that had health insurance coverage in 2015.

So what does this mean to me as an employer?

Well, that depends…

Do you have OVER 50 full-time employees?

  1. You are required to send the 1095-C form out to all your employees.
  2. Your employees will be receiving, AT LEAST, two 1095 forms. More if they have been at additional employers in 2015. They need to know what these forms are and that they need to keep them for their taxes. So if your employee had two different jobs in 2015, he or she would likely get FOUR separate 1095 forms. They are going to want to know what these are for and more importantly – to not throw these away! CLICK HERE to download employee communication regarding the 1095-C form.
  3. Employers are also required to file form 1094, which is the summary transmittal form. It is just like the W-3 you send along with your W-2s.

Do you have UNDER 50 full-time employees?

  1. You are not required to send a 1095-C form, but must be able to explain to your employees what the 1095-B form is and why they are receiving it.
  2. It is in your best interest to communicate with your employees that they should not throw these forms away. CLICK HERE to download employee communication regarding the 1095-B form.

How to Complete These Forms (OVER 50 Full-Time Employees)

By now, your benefits broker should have discussed what options you have regarding the completion of these forms. Many HRIS, payroll and Benefits Administration vendors have added modules that can be used to assist with this task. W3 also worked with our technology consultant to create a self-service tool much like “Turbo tax” that can be used to walk you through completion step by step.


What is your Deadline?

These deadlines where recently extended to give employers and other providers more time to analyze and report coverage information.

  • March 31, 2016 – Deadline for furnishing Forms 1095-B and 1095-C to individuals
  • May 31, 2016 – Deadline for filing Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS
  • June 30, 2016 – Deadline for electronically filing Forms 1094-B, 1095-B, 1094-C and 1095-C

Good to know…

Due to the delay of the ACA reporting deadlines, some individuals may not receive Form 1095-C by the time they file their income tax returns.

For 2015 only, individuals who rely on this information from their employers to determine whether or not they are eligible for premium tax credits do not need to amend their tax returns once they receive Form 1095-C.

Instead, they should keep this form for their tax records. This exception also applies to individuals who may rely on Form 1095-B to prove they had minimum essential coverage all year.

Under 50 Employees? 
Over 50 Employees?