Employers that have at least 50 full time employees working for them throughout 2015 must be sure they have their plans set in place to achieve Affordable Care Act (ACA) compliance.
Forms must be given to employees before February 1, 2016, and the IRS must receive them by February 29th, 2016 (for paper filing) and March 31st, 2016 (for electronic filing). Employers that have less than 50 employees who work full time are only required to be ACA compliant if they are self-insured, otherwise they are exempted.
Important Dates at a Glance
- 15th November 2014 to 15th February 2015 (Individual enrollment period)
- 1st January 2015 (Transitional Reinsurance Fee due for the first quarter)
- New Update: 1st January 2016 (“Pay or Play” mandate for business with 50 to 99 employees)
- 31st January 2016 (IRS Reports due for full time employee information)
Refer to the video below to understand the important dates for the 1095-C form and the 1095-B form.
Making Sense of the Affordable Care Act
The enactment of the ACA now requires large companies to be involved in the “Shared Responsibility Payment” which means that they are responsible for assisting both their workers and their dependents in covering their health insurance. While the ACA doesn’t specifically require large employers to provide health insurance which is acceptable, it will enact penalties if employees buy individual insurance packages via the Marketplace Exchange and then get a tax credit.
As of 2nd July, 2013, the deadline for the Shared Responsibility Provision was delayed, but will go into effect by 1st January, 2016 for every company that has a minimum of fifty employees. It is important for these employers to understand all the regulations and rules as they will affect their business. Employers are also encouraged to consult experts who can assist them in creating a health coverage strategy that meets their long term business needs.
Calculations to Make for Large Employers
The ACA defines a large employer as any business which has at least 50 employees who work full time. Employers can check to see if they fall under this definition through the usage of an FTE calculator. Tax advisors and accountants can also help, although many companies are not relying on benefits software systems to help them.
A full time employee is a worker who works at least thirty hours per week on average. To determine this, employers can use the Measurement Period, which is more than three months but less than 12 months consecutively. The total number of hours will then be divided by the measurement period.
For instance, a worker who has worked for 960 hours during a 6-month measurement period averages approximately 160 hours each month. This worker would be defined as a full time employee because their monthly average is greater than the 130-hour limit defined by the ACA. Seasonal employees who work full time are only included if their service hours are greater than 120 days within the measurement period.
What You Also Need to Watch Out for
The Internal Revenue Code makes a distinction between the “hours worked” and “service hours.” Service hours include both the hours when the employee works along with the hours where the employee is paid even though they don’t work (paid vacations or leave). Sole proprietors and partners within a partnership are exempted from ACA regulations, as well as shareholders who control more than 2 percent of a corporation. Employees who work overseas are not within U.S. jurisdiction and thus should not be included in the calculations.
Managing ACA compliance can be a tedious affair so if you want your business to benefit from stress-free ACA reporting management, talk to us at TRAXPayroll to find out more.