Top 3 ACA Provisions and Why You’re at Risk
There are three provisions that put employers at risk for being noncompliant: the Shared Responsibility Mandate, the Individual Mandate, and the 2018 Excise Tax. Employers and the service providers who support them need to be aware of these provisions and the risk of incurring penalties.
The Shared Responsibility Mandate
Employers with more than 50 full-time employees are subject to the Shared Responsibility mandate. These businesses must provide affordable, minimum-level health coverage. If they fail to meet this demand, the employer is subject to the Shared Responsibility fee.
This figure is calculated by taking the number of full-time employees and multiplying it by $2,000. There are prerequisites and additions to this figure. Check with the IRS for complete information on applicable fees.
Businesses with fewer than 50 standard, full-time employees may think they aren’t at risk, but the ACA accounts for the number of workers and their hours over a period of 120 days to get these calculations. An employee averaging 30 hours per week qualifies as full-time under this definition. If you aren’t keeping track of personnel and their hours, this could be a surprising penalty.
The Individual Mandate
In 2014, the Affordable Care Act announced a new mandate: individuals must have health insurance or pay a penalty for noncompliance. Individuals are required to maintain minimum essential coverage for themselves and their dependents, though certain exemptions apply.
Individuals need minimum essential coverage to avoid this tax penalty. While this doesn’t affect business, enterprises are required to inform their workers of the insurance they provide and whether or not they’re covered. Failure to inform your employees of their coverage and eligibility may result in a fine of up to $100 per day, according to the Fair Labor Standards Acts.
2018 Excise Tax
Also known as the “Cadillac” tax, this fee is an approximate 40% excise tax on employer-sponsored health coverage that exceeds “high-cost” benefits. This is set by the ACA’s definition of affordable care.
These “high-cost” thresholds are designed to ensure employer-sponsored health coverage options aren’t costing employees too much. This is currently set at $10,200 for individual coverage and $27,500 for family coverage.
Precautions and Best Practices
As the ACA continues to roll out changes and incorporate new taxes, it’s vital for a business to stay on top of its data collection and reporting. This is the only way to guarantee a company provides the coverage mandated and satisfies all applicable laws. This must include flawless record keeping, an expert knowledge of reporting guidelines, and more. For more information on avoiding tax penalties related to the ACA, contact Balance Point today.
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