Read Carefully to Make Sure You're Compliant
If you are the owner of a business with fewer than 50 employees, you may be under the impression that you don’t need to concern yourself with the requirements of the Affordable Care Act. After all, when the act became law, it created to distinct business categories, with business who employ more than 50 full time and/or full time equivalent employees having specific requirements that they had to fulfill in terms of providing affordable insurance to employees and their dependents, while smaller businesses who had fewer than 50 employees did not have the same directive. Though that may seem straightforward, the nitty gritty details of the law make it incumbent upon you to read carefully to make sure that you’re in the clear.
Get Acquainted With What “Under 50 Full Time Equivalent Employees” Actually Means
The most important thing you need to do is to ensure that you actually fall into the “under 50” category, because the exact definition is not as clear cut as you’d think. There is a very detail-oriented calculation that you need to do to ensure that you don’t have a requirement to offer affordable health care, because if it turns out that by the government’s definition you have over 50 full time equivalent employees and you haven’t offered insurance, you are on the hook for some hefty penalties.
The calculation is completed by taking the total number of full-time employees you have and adding it to the number of full-time equivalent employees you had for each month of the year last year, then divide the product by 12. The trick is that the government requires that you consider anybody who works 30 or more hours per week full time, and that to figure out how many full time equivalent employees you have you need to add up all of the hours that your part time employees work over the course of a month, then divide that number by 120. You don’t need to include seasonal employees’ hours in the calculation. Once you have that number for each month, you can get a true calculation. If you find this too complicated, don’t hesitate to contact us for help figuring it out.
The Self-Insured Employer Caveat
Companies with fewer than 50 full time or full time equivalent employees don’t need to offer affordable insurance, or even to provide any of the Affordable Care Act’s required reports. The only exception to this rule is for those who are self-insured and who do in fact provide insurance: these companies need to submit a completed Form 10940C as well as a 1095-C for each worker.
What If You Have Fewer than 50 and WANT to Offer Insurance?
For those small business who are not required by the Affordable Care Act to provide insurance, but wish to anyway, the government offers the options of buying coverage through the Marketplace’s Small Business Health Options. This is also known as the SHOP Marketplace, and though it gives your workers the advantage of having insurance, they will not qualify for the premium tax credit subsidy. The only way that they are entitled to that subsidy is if they purchase their insurance from the Marketplace as an individual policy.
The government is very interested in having employers provide affordable health insurance, and in order to encourage businesses with less than 25 full time equivalent employees making less than $50,000 to do so, they offer these employers a special small business health care tax credit available for a maximum of two years to those who buy the coverage through the Shop Marketplace. The coverage purchased must provide for a minimum of half of the organization’s full time employees’ policy costs. Though the credit was meant to serve as an incentive, a recent analysis by the General Accounting Office indicated that it has not been as successful as had originally been hoped.
Determining which category your organization falls into, and how best to stay in compliance with the laws while minimizing your costs and doing what is best for your employees, can be hard. The professionals at our office have studied the various rules and requirements of the Affordable Care Act diligently and are available to help you make sense of it all. Call us today to set up an appointment to make sure you’re doing things the right way.
Questions about the Affordable Health Care Act? Let us help with your tax planning. Call today at (813) 600-3199 to discuss your situation.