The Affordable Care Act (ACA), also known as Obamacare, includes an Employer Shared Responsibility Provision concerning the expectations for certain employers to provide mandatory healthcare benefits for their employees. The employer mandate is included in the Employer Shared Responsibility Provision, and it basically states that large employers share in the responsibility of providing affordable health insurance options for U.S. citizens. In plain terms, companies that employ fifty or more full-time equivalent (FTE) employees are required to provide health insurance (that meets mandatory minimum essential coverage standards) for at least 95% of their full-time staff (and dependents up to age 26) or face serious penalties for failure to do so. The enactment date for this provision was moved from 2014 to 2015/2016, so the deadline for compliance is fast approaching.
This has raised some questions about what constitutes a full-time employee, and so there are guidelines in place to clarify. FTE employees include anyone that works or can reasonably be expected to work 30 or more hours each week or 130 or more hours in a month. As for seasonal or temporary employees that meet these criteria, those that work more than 120 days in year must be included as FTE employees for the purposes of determining company size (over or under 50 employees). Additional guidelines are in place to help employers determine whether or not variable employees qualify as FTE.
This does not exclude small businesses (with fewer than 50 FTE employees) from providing health insurance benefits, and in fact, they are encouraged to do so and given special considerations when they do. For example, companies with fewer than 25 FTE employees that have average annual salaries of less than $50,000 are eligible for tax credits when they purchase group health insurance plans through the SHOP (Small Business Health Options) program. But under the employer mandate, small businesses with fewer than 50 FTE employees are not required to provide health benefits for employees.
So what happens when larger companies fail to comply with the employer mandate? First, there are three different ways that employers can fail to fulfill their obligation. If companies fail to provide coverage, if they provide coverage that doesn’t meet mandatory minimum essential coverage, or if the coverage they provide is deemed to be unaffordable for employees, then they will be considered noncompliant and will be penalized. The penalties are fairly severe.
If a company has 50+ FTE employees, at least one of who is receiving subsidized insurance, and they fail to offer health insurance benefits, the company will be penalized for failure to comply with the employer mandate under the ACA, to the tune of $2,000 per employee (after the first 30). Companies that do offer insurance but fail to meet their obligation in another way will not only have to pay $2,000 per employee (after 30), but $3,000 for subsidized employees.
The employer mandate is complicated, to say the least, between figuring out which employees qualify as FTE, ensuring that the right insurance policies are in place, and trying to avoid severe penalties. However, businesses on the cusp have no choice but to determine their standing and comply with the law. Otherwise they could end up wasting a lot of dough on penalties that they could have otherwise used to offer employees suitable benefits instead.
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