In order for the Internal Revenue Service (IRS) to verify that individuals and employers are meeting their shared responsibility obligations and that individuals who request premium tax credits are entitled to them, employers and issuers will be requir…
Counting employees under health care reform is not as easy as 1 – 2 – 3. The rules are quite complicated, and if not done correctly can have serious repercussions for your business. The final employer shared responsibility (“play or pay”) regulations have been issued and beginning in 2015, larger employers will need to either offer health coverage that meets the requirements of the Patient Protection and Affordable Care Act (PPACA) or pay penalties. Although the requirement is not effective until 2015, employers need to be gathering data and making decisions now.
Counting employees under health care reform is not as easy as 1 – 2 – 3. The rules are quite complicated, and if not done correctly can have serious repercussions for your business. The final employer shared responsibility (“play or pay”) regulations have been issued and beginning in 2015, larger employers will need to either offer health coverage that meets the requirements of the Patient Protection and Affordable Care Act (PPACA) or pay penalties. Although the requirement is not effective until 2015, employers need to be gathering data and making decisions now.
Want to know what is happening in Washington, D.C. as it relates to the now four-year-old Patient Protection and Affordable Care Act (PPACA)? While parts of the law have been implemented, major additional requirements are scheduled to take effect over …
Want to know what is happening in Washington, D.C. as it relates to the now four-year-old Patient Protection and Affordable Care Act (PPACA)? While parts of the law have been implemented, major additional requirements are scheduled to take effect over …
With every day that goes by, the nation’s employers move a step closer to having to make “play or pay” decisions. Many employers have less than a year to prepare for the arrival of this core provision of the Patient Protection and Affordable Care Act (PPACA). Their decisions are far from easy… the ensuing financial, legal, and competitive implications are profound… and the clock is ticking.
Some employers believe that the play or pay mandate will raise their costs and force them to make workforce cutbacks. As a result, they’re considering the “pay” option—i.e., eliminating their health care coverage altogether and paying the penalty on their full-time employees. Other employers are leaning toward “play,” which means they’ll offer employees medical coverage that meets the requirements of PPACA. While employers should look carefully at both options and do their best to calculate the outcomes of each, the actual solutions implemented by many likely will be creative combinations of approaches (making some reductions to benefits while enhancing others). After all, as with many other workforce-related decisions employers make, their main objective will be to remain financially competitive while still being able to attract and retain the employees they require.
When considering the financial implications of play or pay decisions, keep in mind the fact that PPACA actually calls for two potential penalties for large employers: One penalty for not offering “minimum essential” coverage, and the other penalty for offering coverage that’s considered inadequate because it isn’t “affordable” and/or doesn’t provide “minimum value.” Which employers are considered “large” is different for 2015 and later years. Under the law, an employer is considered “large” if it has 50 or more full-time or full-time equivalent (FTE) employees in its controlled group. However, employers with 50 to 99 full-time and full-time equivalent employees in their controlled group will not need to comply until 2016 if they meet certain requirements.
The minimum essential coverage penalty is calculated monthly at the rate of $166.67 for each full-time employee, less a set number of “free employees.” (Although the penalty is calculated monthly, it will be paid annually.) EXAMPLE: In 2016, Dave’s Donuts does not offer medical coverage to its employees. Dave has 60 full-time employees and 12 part-time employees. Two employees purchase coverage through an exchange. Dave’s Donuts will owe a penalty of $5000.10/month: 60 full-time employees, minus “30 free employees,” multiplied by $166.67 (part-time employees are not counted for purposes of this penalty).
In 2015, employers that owe penalties may subtract 80 “free employees.” For later years, that number will reduce to 30 “free employees.”
The penalty for not offering affordable minimum coverage is $250 per month ($3,000 per year) for each full-time employee who:
EXAMPLE: In 2016, Jones, Inc. has 55 full-time employees and eight part-time employees. Jones offers coverage that is minimum value, but which is not affordable for 10 of the full-time employees (nine of whom buy coverage through an exchange) and all of the part-time employees (who all buy coverage through an exchange). Seven of the nine full-time employees and six of the eight part-time employees who buy through an exchange qualify for a premium tax credit.
Jones, Inc. owes a penalty on each full-time employee who enrolls in an exchange plan and receives a premium tax credit, so the company owes $1,750 (seven regular full-time employees who receive a premium credit multiplied by $250; the part-time employees are not counted). The first 30 (or 80) employees do count under this “inadequate coverage” penalty. Also, if the “no offer” penalty would be less expensive than the “inadequate coverage” penalty, the employer would pay the “no offer” penalty. the “no offer” penalty.
For a closer look at these penalties and other key issues impacting play or pay decisions, download UBA’s white paper, “The Employer’s Guide to ‘Play or Pay’” http://bit.ly/1chiLEQ.
Employers of all sizes are challenged to rethink employee benefits in this new world of health care reform. Tight budgets and a still-recovering economy are spurring benefits managers to think beyond health insurance and look at their benefits as a whole. They must think creatively and more broadly. They must step up their communications to help employees manage the changes ahead. The task requires commitment, but the payoff is more than worthwhile: a benefits program that helps employers of all sizes compete more effectively in tomorrow’s marketplace.
Employers of all sizes are challenged to rethink employee benefits in this new world of health care reform. Tight budgets and a still-recovering economy are spurring benefits managers to think beyond health insurance and look at their benefits as a whole. They must think creatively and more broadly. They must step up their communications to help employees manage the changes ahead. The task requires commitment, but the payoff is more than worthwhile: a benefits program that helps employers of all sizes compete more effectively in tomorrow’s marketplace.
Q: I know there are new out-of-pocket maximum rules beginning in 2014. Can you explain them?
A: Beginning with the 2014 plan year, plans may not have an out-of-pocket maximum greater than $6,350 for single coverage and $12,700 for family coverage. The …
With apologies to 1960s American surf rock group Ronny & The Daytonas: Little PTO, you’re really lookin’ fine! If employers think that employees who take all their time off are less dedicated and, therefore, less productive, they couldn’t be more w…