The Affordable Care Act includes requirements that impact both small and large businesses. However, its impact is primarily aimed at those businesses with 50 or more "full-time equivalent" employees.
- Businesses that are under that threshold do not have to modify their current insurance coverage, nor must they provide coverage to those employees whom the employer does not currently insure.
- Businesses with 50 or more "full-time equivalent" employees must offer those employees health insurance or they will face a monetary penalty.
- The health insurance plan offered by covered businesses must be "affordable" - that means any share of the premium paid by the employee cannot be greater than 9 1/2 % of the amount reported on the employee's Form W-2, Box 1 (i.e. wages). This limit applies to employee-only coverage.
- The Affordable Care Act also requires that the health care plan provide at least 60% of a covered employee's anticipated costs for health care.
- "Full-time equivalent" does not simply mean "full time". A "full time" employee is one who works 30 or more hours per week, and they are covered in the definition of "full-time equivalent." However, part-time employees may also constitute "full-time equivalent" employees. Each month, their hours must be counted and then divided by 120 hours to determine how many part-time employees are covered under the Affordable Care Act.
- Businesses that primarily utilize seasonal employees, such as landscaping companies and some retail companies, are also subject to the Affordable Care Act. However, they may be excepted from the requirement to provide health care coverage if during the year prior to the reporting year the business utilized 50 or more full time equivalent employees for less than 121 days, and the employees who resulted in the employer exceeding the 50 full-time equivalent limit were "seasonal employees" as defined by the Department of Labor.
- Business owners should expect increased scrutiny from the Internal Revenue Service with respect to part-time and seasonal employees, as there is concern that employers will attempt to avoid the requirement to provide affordable health insurance coverage that provides the value required under the Affordable Care Act.
- The start date on which covered businesses must provide health care coverage in accordance with the Affordable Care Act was originally January 1, 2014. However, the start date has been postponed and rescheduled for January 1, 2015. This extension did not alter the October 1, 2013 deadline by which employees of businesses with more than $500,000 in annual business were to be provided written notice of state health insurance exchanges.
The rescheduled start date provides you the opportunity to evaluate your obligations under the Affordable Care Act, and to plan accordingly. Do not waste that opportunity.
