On Feb. 10, 2014, the Internal Revenue Service issued final regulations on the Employer Shared Responsibility provisions under the Affordable Care Act. Here are five things everyone needs to know about the Affordable Care Act:
1. The Employer Shared Responsibility Provisions are in effect beginning Jan. 1, 2015.
No Employer Shared Responsibility payments will be assessed for 2014.
2. Number of employees
Employers will use information about the number of employees they employ and their hours of service during 2014 to determine whether they employ enough employees to be classified as a large employer for 2015.
3. Employer size
• Small businesses with fewer than 50 employees (about 96% of all employers): Under the Affordable Care Act, companies having fewer than 50 employees are not required to provide coverage.
• Mid-size businesses with 50 to 99 employees (about 2% of employers): Companies not providing quality, affordable health insurance to their full-time workers will report on their workers and coverage in 2015, but have until 2016 before any employer responsibility payments could apply.
• Larger employers with 100 or more employees (about 2% of employers): Employers need to offer coverage to 70% of employees in 2015 and offer 95% in 2016 and beyond. Employers in this category not meeting these standards will make an Employer Shared Responsibility payment for 2015.
For 2015 and after, an applicable large employer will be liable for an Employer Shared Responsibility payment only if:
• the employer does not offer health coverage or offers coverage to fewer than 70% of its full-time employees and the dependents of those employees and at least one of the full-time employees receives a premium tax credit to help pay for coverage on a marketplace (exchange);
• the employer offers health coverage to all or at least 70% of its full-time employees, but at least one full-time employee receives a premium tax credit to help pay for coverage on a marketplace (exchange).
5. Transition rules extended
A package of limited transition rules applied to 2014 under the proposed regulations is extended to 2015 under the final regulations, including:
• Employers first subject to shared responsibility provision: Employers can determine whether they had at least 100 full-time or full-time equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year.
• Non-calendar year plans: Employers with plan years that do not start on Jan. 1 will be able to begin compliance with employer responsibility at the start of their plan years in 2015 rather than on Jan. 1, 2015.
Kim Mahanna is a certified public accountant with Smith Schafer Associates Ltd. with 34 years of experience, including working with bus company owners. For more information on this or other tax-related topics, contact the Smith Schafer transportation team at (651) 770-8414 or go to www.smithschafer.com.