Recent Obamacare Changes for Large and Small Employers

Changes in Employer Mandate, Fines, Employer Reporting

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The Affordable Care Act (also known as "Obamacare" or the "ACA")) was enacted into law in March 2009, and since then every year has brought more changes and more requirements for employers. This article discusses the major changes to Obamacare affecting employers in 2015.

The provisions for business depend on employer size; that is, on the number of employees. . . So what's a large employer vs. a small employer?

Determining Number of Employees

It sounds simple, but of course with the IRS nothing is simple. To determine how the ACA will affect your business, you must first calculate the number of employees, explained below. You must also determine the number of employees last year (2014, in this case) and this year (2015).

Whether your firm is large or small for Obamacare depends on number of full-time equivalent employees (FTE). It's not just the number of full-time employees, because you may have some employees who work full-time and some who don't. First, must determine number of employees by using the calculation for full-time equivalent.

Now that you have calculated the number of FTE, you can decide if you are a small employer or a large employer.

Small Employers

A small employer, for ACA purposes, is a business that has fewer than 50 FTE employees. If you are a smaller employer, your business does not have to comply with the Employer Shared Responsibility provisions, and you may be eligible for a small business health care tax credit.

Large Employers

For purposes of the ACA, an employer with 50 or more FTEs is considered an applicable large employer (ALE). Larger employers must comply with the Employer Shared Responsibility provisions, explained below, and must report employee health coverage.

An Overview of ACA Provisions, by Employer Size (from the IRS)

Employers with:

  • Fewer than 25 full-time equivalent employees may be eligible for a Small Business Health Care Tax Credit to help cover the cost of providing coverage. Read more about how your business might qualify for this Small Business Health Care Tax Credit.
  • Generally 50 or fewer employees may be eligible to buy coverage through the Small Business Health Options Program (SHOP), through the health care exchanges.
  • 50 or more full-time equivalent employees will need to file an annual information return reporting whether and what health insurance they offered employees. 

Employer Mandate and Employer Shared Responsibility Payments

The primary ACA provision that is now in effect is in regards to the Employer Shared Responsibility (ESR) provisions. 

Larger employers (those with 50 or more full-time equivalent employees) must offer health care insurance coverage to workers who are full-time, at least 30 hours a week, average. Employers who do not offer coverage must pay a fine.

Employers who don't offer coverage to at least 70% of full-time workers must pay a fine. In 2016, the coverage must be offered to 95% of workers, and the fine is higher.

Employers must also offer "affordable" coverage to these employees. If the coverage does not meet the affordability test, the employer must pay a fine for each full-time worker who gets a tax credit for purchasing coverage on an exchange. Coverage is deemed "affordable" if the employee coverage for himself or herself isn't more than 9.56% of wages. The plan must also pay at least 60% of the costs of covered health services.

Employer Reporting for All Employers

Employers must begin accumulating employee insurance data for 2015 and report on that data in 2016. That is, each employer must provide a report showing each employee's health insurance coverage, including whether the employer offered coverage and whether the employee accepted or refused, so that employees who choose not to pay for health insurance can be charged.

The reports will be required beginning in January 2016, for 2015 coverage and will be completed using Form 1095-C.

IRS Information on the Affordable Care Act

For more information on the affect of employee group size on health care, see this IRS web page on Affordable Care Act Provisions for Employers, which explains which provisions are in effect for largr and smaller employers.