Regardless of whether your company is large or small under the Affordable Care Act (ACA), it’s critical to understand minimum essential coverage (MEC) and reporting requirements or risk paying unnecessary penalties.
More than 50 employees
Under the Employer Shared Responsibility Provision of the ACA, businesses employing at least 50 full-time employees must make affordable health coverage available. Calculating the number of employees can be tricky. Consult the IRS guidelines showing how seasonal and part-time employees should figure into your final calculations.
Historically, many low-wage industries with high turn over have not offered health plans. To help manage this new requirement, a MEC plan provides bare bones coverage and costs less than traditional group health insurance. Premiums can be funded by the employer, the employee or co-funded. Any employer contribution is tax deductible. The plan offered must be affordable and provide minimum value to all of its full-time employees (and their dependents). Make sure you fulfill all requirements because each comes with its own penalty.
Affordable and Minimum Value: The plan must cost 9.5% or less of an employee’s annual household income and cover at least 60% of the employee’s medical expenses. Employers avoid up to a $3,000 per employee penalty.
Coverage Offered: The employer must offer coverage to all or at least 95% of its full-time employees (and their dependents). Employers avoid a $2,000 per employee penalty.
Less than 50 employees
The employer shared responsibility provision does not apply to companies with less than 50 full-time employees in the prior calendar year. That being said, many smaller companies provide health insurance as a way to recruit and retain talent. There’s a dedicated health insurance marketplace called Small Business Health Options Program (SHOP), where employers can compare and purchase affordable health plans. The only challenge is options can be limited. Outside of SHOP, there are many group health plan options that can be affordable AND reflective of your company’s values.
Important for all employers
Even if you’re a small company, you’re not off the hook. Any company providing self-insured health coverage to their employees MUST report it to the IRS annually. You must also provide reported information to each employee. Failure to file can cost $100 for each return.
With concerns over ACA compliance, a growing number of employers are depending on professional employer organizations (PEOs) to advise them on benefit options and HR best practices. MidwestHR, a top PEO in Illinois, has helped many small and medium sized businesses set up minimum essential coverage that meets all ACA requirements and saves thousands in penalties. We are currently accepting new clients – give us a call 630-836-3000 to discuss your company’s needs.
