3 Things You Need To Know To Be ACA Compliant
Learn the bACAsics
Welcome to ACA Compliance. It is time to hunker down and really understand what’s going on so we can all be prepared for what’s coming. Once you understand some of the basics, it isn’t as daunting as it seems at first. We did our homework and are ready to help you get started with some preliminary info.
The Measurement Period, ALEs, And FTEs And How They’re Related
The Measurement Period essentially serves 2 purposes. 1. The Measurement Period allows you to figure out the number of full time employees plus Full Time Employees Equivalents (FTEs) at your business. That in turn determines whether you are an ALE (Applicable Large Employer), which dictates your responsibility to your employees in regards to healthcare. 2. If you are in fact an ALE, the Measurement Period will help you decide whether an employee is Full Time or Part Time and therefore whether you need to offer benefits or not.
What are the factors of an FTE?
A full time employee, according to the ACA, is any employee that works 30+ hours per week or averages 130 hours in a month. This means an employee can work 44 hours some weeks and 28 hours others, but if they average 130 in a month, they are full time. The number of Full Time Equivalent Employees is calculated by combining part time employees that equal 30 hours per week. So if a company has 2 employees that each work 15 hours, they are 1 FTE. If a company has 30 employees that each work 20 hours, they have 20 FTEs. This is added to the number of full time employees to create
What defines an ALE?
An ALE (Applicable Large Employer) is a company that employees 50 or more full time employees or Full Time Employee Equivalents (FTEs). If a company has both part time and full time employees, the number of FTEs is added to the number of full time employees to arrive at the grand total FTE. If a company has all part time employees, the number of FTEs determines their status as an ALE.
How To Comply With ACA Standards
Simply offering health insurance coverage to your employees does not necessarily mean you are ACA compliant. In order to be compliant, businesses must report exactly what they’re offering their employees. This reporting is done through mandatory end of the year filing of both forms 1094-C and 1095-C. Also, employers are just not able to provide any old insurance. Employers must provide affordable minimum value coverage.
What does affordable coverage mean?
Coverage is considered affordable if the employee’s contribution for single rate insurance is less than 9.5% of their annual income. Rates should generally be based on the lowest-paid employee in order to ensure that every employee has an affordable premium and that your business maintains compliance.
What exactly is minimum value coverage?
Minimum value coverage must pay an average of 60% of all medical costs incurred by the employee.
All major medical plans must provide minimum value from 2014 and beyond. To confirm your plan does, check with your carrier or HMO.
Oh, Yes. There Are Penalties
Most employers want to take care of their employees anyway. But just to make sure, the ACA wants to gently (strongly) encourage employers by penalizing anyone who doesn’t comply to the standards. Here is a rundown of the penalties and fines:
- $2000 per year (incurred monthly at a rate of 1/12 the total) for each full time employee, after the first 30, who is not offered coverage
- $3000 per year (incurred monthly at a rate of 1/12 the total) for each full time employee, after the first 30, whose coverage is not deemed affordable
- $200 for each incorrect or delinquent 1094C or 1095C
- $200 for each missing statement of benefits to your employee
There you have it. This intro should help guide you in your first steps of preparation for filing. As with all things, preparation is key and it is best to get started early. As in…now.
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