5 Must-Know Obamacare Obligations for Every Entrepreneur
Obamacare or ACA compliance is real, it’s complicated and it’s here to stay. Business owners today face a new challenge to be at par with ever changing rules and their interpretations and to also act accordingly to track and report to the IRS.
Below we present a couple of factors that are a good start for analyzing the current status of a business owner in terms of liability towards ACA.
1. What are the Current Obligations?
As per the ACA rules employers having more than 50 full-time employees (including full-time equivalents) and less than 100 are required to offer healthcare coverage to all full-time employees in 2015. For this, it is also necessary for the sake of calculations that the employer count their employees from 2014.
As per the ACA rules employers having more than 50 full-time employees (including full-time equivalents) and less than 100 are required to offer healthcare coverage to all full-time employees in 2015. For this, it is also necessary for the sake of calculations that the employer count their employees from 2014.
A majority of employers are not aware that they need to calculate their full-time employees and FTEs from last accounting year to know if they fall into the category for compliance with the ACA (for healthcare coverage). Not only that, they need to keep a track on current year employee numbers to know their liability for the next accounting year.As per the ACA definition, employees who have worked 30 hours a week on an average are classified as Full-time employee. Obama care (ACA) makes it mandatory for business owners to offer healthcare coverage to their FTEs also.
2. What are Full-Time Employees? (Definition)
As per the ACA definition, employees who have worked 30 hours a week on an average are classified as Full-time employee. Obama care (ACA) makes it mandatory for business owners to offer healthcare coverage to their FTEs also.
Since many definitions exist for the full-time employee classification and all categorize them as someone who has worked for more than 40 hours per week, the new classification of a full-time employee who works 30 hours per week is a new one and strictly from the ACA. This also means that now the employers have to offer health care coverage to more number of employees.
Read Also: IRS Health Care Tax Considerations for Small Employers with Fewer than 50 Employees
3. Health Care Coverage – At Least to a Minimum Percentage of Full-Time Employees
All large employers should identify their full-time employees as they have to offer healthcare coverage to a fixed percentage of the full-time employee base, failing in which they are liable of $2,000 penalty from the IRS for each full-time employee.
ACA states that the large employers are supposed to offer healthcare coverage to at least 70 percent of their full-time employees in 2015. And that was still beneficial for the employers in 2015 as from 2016 ACA mandates that the large employers offer healthcare coverage to at least 95 percent of their full-time employee base or else face a penalty of $2,000 per full-time employee.
Related: Health Insurance Providers Must Report Certain Information to the IRS and Covered Individuals
4. Employers must Offer Affordable Coverage Options
Once the initial screening of healthcare compliance is done, the employer is then required to ensure that the coverage provided is of Minimum Actuarial Value (MAV) and also that the coverage is affordable by their employees. MAV is defined as the value which is at least 60 percent of the total benefits cost mentioned in the medical plan.
Providing with healthcare coverage is not enough, the employer has to make sure that it is affordable too. If this is not the case and the employee gets coverage from state health care exchange where they can earn tax credit the employer is liable to be penalized for $3,000 per case.
5. Healthcare Coverage – Tracking and Reporting
Things beyond providing healthcare coverage are bit more intricate as it involves tracking and reporting that are in compliance with the IRS.
From the reporting perspective Form 1095-C, the employee statement is a lengthy document. And employers have to track, calculate and report all the pertinent data points accurately. For a small business owner, that’s a lot of paperwork.
The uncertainty around the health care coverage complicates the issue, resulting in employer’s compliance checks because of legal penalties around the healthcare reforms.
It is highly suggested that small business owners either go through the ACA document with diligence or automate the process with ACA 1095 software. The filing done using 1095 software is IRS compatible and accurate. The 1095 software comes loaded with all the latest tax and filing rules, so you can be assured of correctness. Or else, the business owner may hire a CPA who specializes in this field.
With all the spiraling ACA intricacies, compliance check involves gathering and calculations of many years. And this makes it extremely difficult for small business owners.