In recognition of National Small Business Week, we’ve put together some tips to help your company grow. Read on to learn how you can make positive steps toward putting your small business in position to thrive.
When your business grows and you begin adding employees to meet growing customer demands, there’s more to consider than making schedules and setting up new work spaces. You must begin considering health plans that meet the needs of your employees while still meeting the complex requirements of the Affordable Care Act, including the employer shared responsibility mandate. Choosing the right health coverage inspires loyalty and productivity in your workers and is a key factor in employee recruitment and retention. You also need to know exactly where your plan stands with ACA compliance, so this is something you want to get right.
Getting to Know the Employer Shared Responsibility Provisions
Some major aspects of the ACA that will affect companies of a certain employee number are the employer shared responsibility provisions. They went into effect for companies of 100-plus employees on January 1 of 2015 and applies to companies in the 50–99 employee range on January 1 of this year.
The provisions require employers to offer an affordable plan of minimum value to at least 95 percent of employees or pay a penalty. The definitions of “affordable” and “minimum value” are explicitly defined in the mandate. This penalty comes in multiple forms, depending on whether your coverage is not affordable for all employees, the coverage is not extended to all eligible employees, or your coverage does not meet minimum requirements.
Decoding ACA Language
The ACA-mandated definitions of many of the terms involved in this provision are essential to determining where your company stands. First, the law is based on a specific classification of your employee number: Full-time workers are defined by a certain amount of hours put in, and part-time or seasonal workers can be packaged into a “full-time equivalent” number that goes into the final count. HealthCare.gov supplies a handy calculator for determining your official FTE number.
You also want to have a full understanding of the ACA’s definitions of “minimum value” (a defined coverage percentage of the total allowed cost of benefits expected to be incurred under the plan) and “affordability” (how much employees’ shares of the premium cost in relation to their household income). For the former, the Centers for Medicare & Medicaid Services offers a “minimum value calculator” to use; for the latter, the IRS offers an exhaustive Q&A page that addresses defined affordability.
Deciding How You Want to Pay
Tools such as this ACA financial calculator can assist you in determining whether it is advisable to simply terminate your health insurance options and pay the penalty instead. It is worth noting that, according to the 2014 Kaiser Family Foundation’s Employer Health Benefits Survey, average premium costs for employer-sponsored health plans rose slightly for family coverage (3 percent) and individual health plans (2 percent). Consult with your plan provider and tax adviser for information to help determine if paying the latest health plan premiums outweighs the cost of the penalty. However, you should note that because benefits are a key part of attracting and retaining talent, cutting benefits may lead to enough employee turnover to make this a far more expensive option in the long term.
As you can see, there is a large amount of information to keep track of when determining compliance with the ACA. Consult with your benefits plan provider or your broker to make sure that you know what you have to do when you audit your current plan or change to a new one. The final decision is in your hands, but you’ll want to have all of the relevant information available to make the smartest possible choice.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Donald Parker has more than 20 years of experience in the insurance and financial services industry with several Fortune 500 companies. He holds a life, accident and health insurance license in Virginia. He has been FINRA Series 7, 24, 63 and 65 registered and specializes in the areas of long-term care, senior needs, retirement and employee benefit planning.