5 Things Accountants Should Ask Their Clients About the ACA
After years of delays and changes, the ACA is finally going to be put in place. The year 2016 will bring one of the biggest changes in legislation is U.S history, and employers with 50-99 full time equivalent employees need to be prepared for these changes.
Come tax time, business owners are going to be affected by the ACA.
Although there are resources to help businesses start preparing for the upcoming changes, the law still has some moving parts and if companies haven’t started preparing it can feel overwhelmingly confusing. Businesses will be turning to their accountants and insurance brokers for information on compliance.
Accountants can give proper feedback and guidance by asking their clients questions to help them better prepare for the Affordable Care Act.
What Accountants Should Ask Their Clients About the ACA
Do You Staff Over 50 Employees?
Get an idea of how many employees your clients keep on staff.
This will determined how the ACA will affect their business. If over 50 employees are staffed then they are considered Applicable Large Employer (ALE). ALEs must comply with reporting requirements, they also have to offer affordable health coverage their employees to avoid penalties.
Are You Currently At Risk Of ACA Penalty Exposure?
If your client doesn’t know what their penalty exposure is, they probably haven’t reviewed the information themselves and they might not know what the penalties are.
Pentalty “a”: Penalty “a” states that in 2016 employers with 50 or more employees need to offer their full time employees (employees who work 30+ hours a week) minimum essential coverage for at least 95% of their employees.
Pentaly “b”: Employers are safe if they’ve complied with the above health coverage to their employees, however penalty “b” is a huge variable when the 5% of employees who are not eligible for health coverage receive a subsidy in the marketplace. The employer is subject to the $3,126 penalty per subsidized employee. This can get pretty pricey.
Accountants should take the time to go over these penalties with their clients so they aren’t hit with any hard fines come tax season.
Do You Know If Your Health Care Plans Are Deemed Affordable?
Even though employers might offer coverage to the correct percentage of employees, if it’s not deemed affordable by the IRS then they are at risk of fines.
An employer may not know if their coverage is affordable for each individual employee, but there are optional “safe harbors” employers can put in place to avoid penalties if their coverage isn’t affordable for some employees.
The three affordability safe harbors are:
- The Form W-2 wages safe harbor,
- The rate of pay safe harbor,
- The federal poverty line safe harbor
An employer can choose to use one or more of these safe harbors to ensure that all of their employees have affordable coverage that’s compliant with ACA standards.
How Many Hours A Week Do You Currently Require Eligible Employees To Work?
The ACA considers a full time employee those who work 30+ hours per week. Employers who require full time employees to work more than 30 hours a week to be eligible as “full time” employees may need to make adjustments in eligibility.
Is There Need For A Variable Hour Tracking?
If a business has a combination of full and part time employees, or have employees with hours that vary, they can measure the amount of hours worked and if they are considered “full time” employees. Under the look-back method, employers are permitted to determine an employee’s full-time status based on a measurement period established by the employer.
Measurement periods can range from 3-12 months during which each employee’s hours will be evaluated to see whether they should be considered a full or part time employee.
This is only applicable to existing employees or new hires who have variable hours.
Are You Prepared To Track Employee Health Care Data?
Applicable large employer group member is required to file 1094-C 1095-C forms its own employees.
- The employer’s name, address, employer identification number and contact person
- The total number of Forms 1095-C filed
- A certification by month as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential health coverage
- The number of full-time employees for each month of the calendar year
- The total number of employees for each month
- Whether special rules or transition relief applies to the employer
- The names and employer identification numbers of other employers that are in a controlled group or affiliated service group with the employer
1095-C forms require an ALE employer must create one form for each employee who works at any time during the month. It must include the following information:
- The employee’s name, address and Social Security number
- The employer’s name, address and employer identification number
- Whether the employee and family members were offered health coverage each month that met the minimum value standard
- The employee’s share of the monthly premium for the lowest-cost minimum value health coverage offered
- Whether the employee was a full-time employee each month
- The affordability safe harbor applicable for the employee
- Whether the employee was enrolled in the health plan
- If the health plan was self-insured, the name and Social Security number (or birth date if the Social Security number is unavailable) of each employee and family member covered by the plan by month
These forms are due by February 28 of 2016 or by March 1 if filing electronically.
Although this just skims the surface, it’s a good idea to reach out to clients and starting asking these questions. The new year will sneak up before we know it. If employers haven’t started preparing for the ACA it can seem really overwhelming. Start helping your clients prepare for the ACA by asking them questions that’ll help you guide them in the right direction.
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