The Affordable Care Act (ACA) requires insurers, self-insured employers, applicable large employers (ALE), and other coverage providers to issue certain reports to individuals and the federal government, including Forms 1094 and 1095 B and C.
Applicable Large Employers (ALEs) that averaged 50+ full-time and full-time equivalent employees during the preceding calendar year should worry about offering affordable medical benefits to their full-time employees because offering unaffordable benefits, even accidentally, can expose employers to considerable employer mandate tax penalties.
This is true for fully insured, self-insured, and level-funded groups.The ACA health insurance exchange marketplaces consider affordability when determining an employee’s eligibility for a premium tax credit (PTC). If an ALE’s full-time employee purchases exchange-based coverage and receives a PTC because the offer from their employer was unaffordable, that credit will trigger a shared responsibility penalty for the employer.
The ACA defines benefits as being affordable when the lowest-cost, employee-only option for medical coverage does not exceed 9.5% of the employee’s household income. But, there are a few important nuances to remember here:
The IRS has created three safe harbors that ALEs can choose from to establish and report on benefits affordability within their Forms 1095-C:
Employers can reference these safe harbors and the applicable affordability threshold for the year to establish employee contributions that satisfy the ACA’s affordability requirement.
Yes. While the individual mandate has been repealed, the employer mandate is still in effect for calendar year 2020.
Under the ACA, employers must offer health insurance that is both affordable and provides minimum value to 95% of their full-time employees (FTEs) and the children of those FTEs, through the end of the month in which those children reach the age of 26. This applies only to fully-insured employers with more than 50 FTEs or full-time Equivalents and all self-insured employers. Employees who work 30 or more hours per week are considered full-time for the purposes of the ACA.
In 2021 employer-sponsored coverage will be considered affordable under the employer shared responsibility rules if the employee’s required contribution for self-only coverage does not exceed 9.83 percent of the employee’s household income for the tax year. ALEs should keep the affordability percentage in mind when setting 2021 employee contribution rates.
30 hours or more per week or 130 hours per month.
Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year.
Two provisions of the Affordable Care Act apply only to applicable large employers (ALEs):
Affordability of healthcare coverage offered by employers to its full-time employees is an important part of the formula to satisfy the ACA Employer Mandate that demonstrates ALEs have appropriately offered affordable health coverage. The IRS provides three affordability safe harbors that employers may claim when submitting their annual ACA information returns.
The three safe harbors employers can use when proving ACA affordability to the IRS are:
1. Rate of Pay
2. W-2
3. Federal Poverty Line (FPL).
ALEs must report to the IRS information about the health care coverage, if any, they offered to full-time employees. The IRS will use this information to administer the employer shared responsibility provisions and the premium tax credit.
ALEs also must furnish to employees a statement that includes the same information provided to the IRS. Employees may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.
All employers over 50 employees will submit a 1095-C to employees and a 1094-C to the IRS.
Self-Insured employers under 50 employees will submit a 1095-B to employees and a 1094-B to the IRS.
Yes. Employers must make an offer of affordable health insurance to all Full Time benefit eligible employees. The employee does not need to take the coverage; the offer is what is important.
For the purposes of determining whether an employer is an ALE, an employee is counted as full-time if they work 30 hours a week or at least 130 hours during the month. A full-time equivalent employee is a combination of part-time employees who are equivalent to a full-time employee.
Yes, businesses can and should outsource their ACA reporting to a trusted vendor like MZQ.
Expertise! The correct vendor will have knowledge of the requirements and the applicable codes. MZQ Consulting helps people navigate the complex world of employee benefits compliance through our deep expertise and superb client service!
The Affordable Care Act (ACA) requires insurers, self-insured employers, applicable large employers (ALE), and other coverage providers to issue certain reports to individuals and the federal government, including Forms 1094 and 1095 B and C.
Yes. While the individual mandate has been repealed, the employer mandate is still in effect for calendar year 2020.
Under the ACA, employers must offer health insurance that is both affordable and provides minimum value to 95% of their full-time employees (FTEs) and the children of those FTEs, through the end of the month in which those children reach the age of 26. This applies only to fully-insured employers with more than 50 FTEs or full-time Equivalents and all self-insured employers. Employees who work 30 or more hours per week are considered full-time for the purposes of the ACA.
In 2021 employer-sponsored coverage will be considered affordable under the employer shared responsibility rules if the employee’s required contribution for self-only coverage does not exceed 9.83 percent of the employee’s household income for the tax year. ALEs should keep the affordability percentage in mind when setting 2021 employee contribution rates.
30 hours or more per week or 130 hours per month.
Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year.
Two provisions of the Affordable Care Act apply only to applicable large employers (ALEs):
Affordability of healthcare coverage offered by employers to its full-time employees is an important part of the formula to satisfy the ACA Employer Mandate that demonstrates ALEs have appropriately offered affordable health coverage. The IRS provides three affordability safe harbors that employers may claim when submitting their annual ACA information returns.
The three safe harbors employers can use when proving ACA affordability to the IRS are:
1. Rate of Pay
2. W-2
3. Federal Poverty Line (FPL).
ALEs must report to the IRS information about the health care coverage, if any, they offered to full-time employees. The IRS will use this information to administer the employer shared responsibility provisions and the premium tax credit.
ALEs also must furnish to employees a statement that includes the same information provided to the IRS. Employees may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.
All employers over 50 employees will submit a 1095-C to employees and a 1094-C to the IRS.
Self-Insured employers under 50 employees will submit a 1095-B to employees and a 1094-B to the IRS.
Yes. Employers must make an offer of affordable health insurance to all Full Time benefit eligible employees. The employee does not need to take the coverage; the offer is what is important.
For the purposes of determining whether an employer is an ALE, an employee is counted as full-time if they work 30 hours a week or at least 130 hours during the month. A full-time equivalent employee is a combination of part-time employees who are equivalent to a full-time employee.
Yes, businesses can and should outsource their ACA reporting to a trusted vendor like MZQ.
Expertise! The correct vendor will have knowledge of the requirements and the applicable codes. MZQ Consulting helps people navigate the complex world of employee benefits compliance through our deep expertise and superb client service!
