The Affordable Care Act has put forth numerous obligations employers with 50 or more workers must follow with regard to reporting their employees’ health benefits. Starting next year, compliance will get stricter. Extensions and leniency are going away, and employers will have to insure more of their full-time employees.
“To avoid hefty penalties associated with noncompliance, employers need to plan ahead of time. They need to have a plan in place to stay in compliance, and work closely with their broker to meet all requirements,” said Victor McKnight, principal at Epic Insurance in Petaluma.
It’s also smart for organizations to create a calendar of critical deadlines and educational materials that can be shared with workers and posted within the workplace. This way, employees will know when 1095-C forms are being distributed and when the documentation is due to the government.
One change that’s affecting small businesses is that while IRS extensions gave employers of 50-plus employees more time to complete and send in forms, those grace periods will not apply for 2017. ACA deadlines are effectively returning to their original dates, according to the Society for Human Resource Management, and will not be pushed back.
The IRS also granted lenience for businesses that made a “good faith” effort to report, but did not necessarily meet full compliance. Businesses now must fully comply.
Also, while in 2015 businesses also needed to insure 70 percent of their full-time workers, for 2017 reporting, businesses with 50 or more employees must insure at least 95 percent of employees to avoid compliance fines. It’s important for organizations to note that this obligation is required for every month, not on average for every year. Failing to provide appropriate coverage for a single month can leave employers at risk for shared responsibility provision penalties, according to the IRS.
For owners of multiple small companies, ACA compliance is even trickier, McKnight said. For example, if someone owns two restaurants each with 30 employees. The mandate applies not to each restaurant, but to that owner’s collective amount of employees.
Another change is coming the next time employers with 50–99 employees renew their insurance policies, McKnight said. The move will be from a composite rate structure, to a much more complex structure that is aged-based. That means instead of say, all single employees paying the same rate, a person who is age 43, for example, will pay a different rate that one who is 44. The age-based structure applies to spouses and dependents as well.
Another issue for employees is something called the “family glitch” a flaw in the ACA implementation that unfairly disadvantages low-income families.
The IRS has adopted a strict benefits-affordability test that takes two things into account: household income and the employer’s plan premiums. If the premiums are under the household income threshold (less than 9.66 percent of household income in 2016), they are deemed “affordable.” However, the premiums the IRS uses as a measure are for individual coverage, not the more pricey family coverage.
If an employer offers a worker an insurance plan that is affordable, the family plan may not be affordable.
“The IRS is looking for people who got subsidies that shouldn’t have,” McKnight said.
THIRD-PARTY VENDORS AS A SOLUTION
ACA compliance is more worrisome to HR leaders at smaller organizations than larger ones. It was ranked as a top concern by 69 percent of employers with 50–99 employees versus 51 percent of those with 500–1,000 employees, according to a recent survey of more than 400 senior-level HR and finance executives at small and midsize U.S. companies.