Just as it does for employees, the Affordable Care Act (“ACA”) contains benefits and responsibilities for employers. The size and structure of an employer’s workforce is primarily determinative of how ACA rules apply to a particular covered situation. This information only applies if a business owner has employees, Otherwise, if there are no employees, other tax provisions, such as the insurance provider fee may affect the business enterprise.
An employer’s size is determined by the number of its employees. Employer benefits, opportunities and requirements are dependent upon the employer’s size and the applicable rules. Generally, an employer with 50 or more full-time employees or equivalents will be considered an applicable large employer.
If an employer has fewer than 50 employees, but is a member of an ownership group with 50 or more full-time equivalent (FTE) employees, it is subject to the rules for large employers. Certain affiliated employers with common ownership or part of a controlled group must aggregate their employees to determine their workforce size.
Small businesses with fewer than 25 full-time equivalent employees, with average annual wages below $50,000, can get tax credits to assist in the payment of employee premiums. Businesses with more than 100 full-time equivalent employees are required to provide health coverage to at least 70% of full-time employees starting in 2015, and 95% of full-time employees starting in 2016. Starting 2016 employers with 50-99 full-time equivalent employees will have to insure their full-time workforce as well.
For employers with 50 or more FTE who do not provide coverage, a fee of $2,000 per full-time employee (minus the first 30 full-time employees) is assessed. For employers with 50 or more FTE who provide coverage but does not provide minimum value or is not affordable, the fee is the lesser of: $3,000 per full-time employee receiving subsidy, or $2,000 per full-time employee (minus the first 30).
Transition relief is available to both small businesses and large businesses moving into compliance with the new mandate. Businesses making over $250,000 in profit must pay a .9% increase on the current Medicare part A tax. The tax is split (.45% each) between the employer and employees making over $200,000 individual ($250,000 family).
If an employer has 50 or fewer employees, it can purchase affordable insurance through the Small Business Health Options Program (SHOP). Employers with fewer than 25 full-time equivalent employees may be eligible for a Small Business Health Care Tax Credit to help cover the cost of providing coverage. The Small Business Health Care Tax Credit is available if an employer pays at least 50 percent of its FTEs premium costs and has fewer than 25 full-time equivalent employees with average annual wages of less than $50,000.
Effective calendar year 2015, large employers are subject to the Employer Shared Responsibility provisions and consequently may have to make a payment if they do not offer adequate, affordable coverage to full-time employees, and one or more of these employees receives a Premium Tax Credit. The premium tax credit, or PTC, is a refundable credit that helps eligible individuals and families with low or moderate income afford health insurance purchased through a Health Insurance Marketplace. To get this credit, a taxpayer must meet certain requirements and file a tax return.
The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions.” The vast majority of employers will fall below the Applicable Large Employer (ALE) threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.
Regardless of size, all employers that provide self-insured health coverage to their employees must file an annual return reporting certain information for each employee they cover. Both small and large employers must withhold and report an additional 0.9 percent on employee wages or compensation that exceed $200,000. You may be required to report the value of the health insurance coverage you provided to each employee on his or her Form W-2.
If you own a business and have questions about the impact of the Affordable Care Act on your business, or you have any other tax questions, call THE TAX EXPERTS AT THE Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
