FAQ’s About Employers And Affordable Care Act Penalties

FAQ’s About Employers And Affordable Care Act Penalties

FAQ’s About Employers And Affordable Care Act Penalties

Yes this is the exact same act as Obamacare.

By Marc Pieroni

Now that the Affordable Care Act is law and employers are faced with the challenge of implementing the health care changes for their employees, it is important to understand the penalties that will be imposed if the new law is not followed.  Below are some frequently asked questions about such employer penalties and responsibilities:

When does the employer responsibility provision take effect?

It is effective beginning January 1, 2014. However, the regulators have announced transitional relief for the first year. This provision will not be enforced until 2015.

What is the penalty for not offering minimum essential coverage?

  • The penalty for not offering coverage is generally equal to $2,000 for each full-time employee, not counting the first 30 full-time employees. Only full-time employees (not full-time equivalents) are counted for purposes of calculating the penalty. After 2014, the penalty amount may be indexed.
  • The proposed rule allows an employer to satisfy the requirement to offer minimum essential coverage if the employer offers coverage to “substantially all” of its full-time employees and their dependents (95% of its full-time employees).  There is potential liability if one of the five percent not offered coverage receives subsidized coverage on the exchange.

What is the penalty for providing minimum essential coverage that is not affordable?

  • Generally, employees who are eligible for employer-sponsored coverage are not eligible to receive subsidized coverage through an exchange. However, an employee may qualify for subsidized coverage through an exchange if his or her household income is less than 400 percent of the Federal Poverty Level (currently, that level is set at $88,200 per year for a family of four and $43,320 for an individual) and (a) the employer does not pay at least 60 percent of the allowed costs under the employer-sponsored plan (the coverage does not provide “minimum value”), or (b) the employee’s required contribution for coverage exceeds 9.5 percent of the employee’s household income (the coverage is “unaffordable”).
  • The penalty for not offering coverage that is affordable or that provides minimum value is generally equal to $3,000 for each full-time employee receiving subsidized coverage through an exchange. However, the penalty will not be greater than the penalty that would apply if the employer offered no coverage at all. Only full-time employees (not full-time equivalents) are counted for purposes of calculating the penalty. After 2014, the penalty amount may be indexed.

Beginning in 2015, employers with 50 or more full-time employees or full-time equivalents must offer medical coverage that is “affordable” and provides minimum value to full-time employees and their children up to age 26, or face penalties.

Coverage is “affordable” if employee contributions are less than 9.5% of:

  • Employee’s W-2 wages
  • Employee’s monthly wages (hourly rate x 130 hours per month) OR
  • Federal Poverty Level for a single individual

A plan must pay 60% of the cost of covered health services to provide “minimum value.”

This chart summarizes the coverage requirements and the penalties that apply if any full-time employee purchases coverage on an exchange and receives a federal premium assistance tax credit. The penalties will be adjusted in future years.

Employer Penalties

Marc Pieroni is the Managing Partner of BenefitCorp, a commercial insurance consulting agency founded in 1995.  Marc is dedicated to helping businesses implement, administer and communicate all lines of insurance and financial products.  Please call Marc at  972-480-0109   www.benefitcorp.com

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune). Any and all rights reserved.

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