Source: National Restaurant Association
October 27, 2014
The federal government has now published most of the regulations to explain how the Affordable Care Act affects employers. But the regulations are complex, and putting them into operation in a restaurant business will be challenging.
The pressure is on: Starting Jan. 1, 2015, many employers could face potential penalties for failing to offer health plans to full-time employees. Hundreds of thousands of employers will have to start tracking new data in 2015 as they prepare to file ACA-required reports with the Internal Revenue Service and employees in early 2016.
The National Restaurant Association, with other organizations representing millions of employers, continues to ramp up the heat on Congress to make changes in the law. But as the law continues to unfold in the meantime, here’s a look at some key questions for employers.
Q: Which employers will face penalties under the ACA?
The ACA’s employer mandate begins to take effect in 2015. The mandate subjects “applicable large employers” to possible penalties if they don’t offer health plans to full-time employees and their dependents. Penalties are phased in:
- Penalties start in 2015 for employers with 100 or more full-time-equivalent employees who fail to offer health care coverage to “substantially all” full-time employees and their dependents. (“Substantially all” means the employer offers coverage to at least 70 percent of full-time employees in 2015. In 2016, this ramps up: Applicable large employers must make coverage offers to at least 95 percent of full-time employees to avoid possible penalties.)
- Penalties start in 2016 for employers with 50 to 99 full-time-equivalent employees. The transition relief for these employers through 2015 applies as long as they meet certain conditions, including not cutting back employees’ hours or positions in 2015 to keep the business under the 100-FTE employee threshold.
Employers with more than one business entity may need to consider all their employees as one group to determine if they meet the 100- or 50-FTE employee thresholds. Consult your tax adviser for details.
To measure the size of their workforce, employers can use transition-relief provisions in the ACA regulations and look at any consecutive six-month period in 2014 to see if they meet the 100-FTE-employee threshold that triggers “applicable large employer” status for 2015. (Note: If your business intends to use the ACA’s “seasonal worker exception” to qualify for an exemption from large-employer status for 2015, you must look at employment over all 12 months of 2014.)
Q: To whom must health care coverage be offered?
To avoid penalties, applicable large employers must offer health care coverage to full-time employees and their dependents. The ACA defines full-time as a person with at least 130 hours of service in any given month, or averaging 30 hours of service a week.
Treasury Department regulations go into extensive detail about how employers should measure whether new employees, seasonal employees and employees whose hours vary from month to month are considered full-time. Restaurant.org/Healthcare
offers links to the regulations
(Note: For 2015, a large employer will generally not face penalties for failing to offer coverage to dependents of full-time employees if the employer can show he or she is taking steps toward providing such coverage.)
Q: What reports will employers be required to file?
The ACA sets massive new reporting requirements for all employers with 50 or more FTE employees. (Note: Employers with 50 to 99 FTE employees don’t have to offer coverage in 2015 but still must file the paperwork in early 2016, whether you offered coverage or not.)
Employers will be required to file their first information returns with the IRS and statements with employees in early 2016, based on data tracked in 2015.
Employers got a preview of the paperwork when the IRS released draft forms and instructions this summer. The forms aren’t likely to be finalized until later this year but covered employers should prepare now to begin tracking the information in January 2015. Employers who don’t could find that rebuilding the necessary data is costly and time-consuming.
The reporting requirements are part of the new Sections 6056 and 6055 of the federal tax code.
Q: What are the penalties for employers?
- Section 6056 requires businesses that employ 50 or more FTE employees to certify whether they offered minimum essential coverage to full-time employees. The reports must be submitted individually by any entity within a “common control” group that has 50 or more FTE employees – even if an entity on its own employs fewer than 50 FTEs. Here’s just a small sampling of the data employers will be required to compile each calendar month, and report by employee tax ID number: number of employees; number of full-time employees; whether an employee is eligible for a health-care coverage offer under the ACA; the employee’ premium contribution; and how the employer determined whether the health care coverage meets the ACA’s affordability standards.
- Section 6055 requirements apply to any entity that offers a health plan, such as self-insured employers and health insurers. These reports will tell the IRS who was enrolled in coverage and for what months. To complete this filing, tax ID numbers must be collected for the dependents of full-time employees.
Large businesses will face two types of penalties starting in 2015 under the ACA’s employer mandate.
- Penalty A -- for failing to offer coverage. Penalty A applies when a large employer fails to offer minimum essential coverage to “substantially all” of its full-time employees. Penalty A can run up to $2,000 per year per full-time employee, minus the first 30 full-time employees. (For 2015, the penalty for applicable large employers with 100 or more FTEs is $2,000 per year per full-time employee, minus the first 80 full-time employees.) The penalty kicks in if any full-time employee gets a federal tax subsidy to buy a health plan through a government-run health insurance marketplace.
- Penalty B -- for offering coverage that’s unaffordable or not of minimum value. Penalty B applies when the minimum essential coverage a large employer offers is not affordable (based on employee’s household income, and on the cost of single-only coverage), or if it fails to meet the ACA’s minimum-value standard (generally recognized as 60 percent actuarial value). Penalty B is $3,000 a year for any full-time employee who receives a federal tax subsidy to buy a health plan through a federal or state exchange because their employer’s plan is not affordable or of minimum value.
The National Restaurant Association offers its members information, resources and tools at the NRA Health Care HQ