Breaking Down the Affordable Care Act for You

ACA Affordable Care ActBack in March of 2010, the Patient Protection and Affordable Care Act (PPACA) – more commonly known as the Affordable Care Act (ACA ) was passed into legislation. Perhaps the most impactful reforms the United States healthcare system had seen since 1965 when the Medicare and Medicaid changes were implemented. With this change comes implications for both employers and individuals. Today we’ll take a look at some of those implications.

Among the ACA’s many requirements is that employers with 50 or more full-time employees must offer health coverage to employees and report on that coverage to the IRS. It’s important to revisit this provision, now, because effective this reporting year, if you fit this description and do NOT offer health insurance coverage to your employees, you may be subject to penalties.

Contrary to what you might believe (or hope), the ACA isn’t going away. The federal government has given us a few years to get used to the idea, understand the act, and begin laying the groundwork to meet requirements. It is now Go Time.

And, like many laws and regulations, the ACA is complicated and has different implications for different organizations. The size of the employer and the type of health coverage offered (or not offered) impacts the required reporting.

To cut through the legalese, here’s a summary of ACA terminology and requirements, along with some key online resources. Of course, you should visit www.irs.gov for complete guidelines.

Overview

The law requires employers with 50 or more full-time employees to offer Minimum Essential Coverage (MEC) with Minimum Value to their employees. Generally, MEC meets affordability guidelines, has coverage guarantees, and offers 10 essential benefits. A plan fails to offer minimum value if the plan’s share of the total allowed cost of benefits provided is less than 60 percent.

Affordability

Affordability, a new term created by the law, is specified by the final regulations as coverage that does not exceed 9.5 percent of the employee’s household income. While that might seem straightforward, employers are in no position to know what their employees’ household income might be. Employers would have to track down spouse’s incomes and other sources of income for that employee. So the regulations provide some alternatives for determining household income. The alternatives for determining household income for affordability are called Safe Harbors.

Applicable Large Employers

Another term introduced by the law is ALE.  ALE is not a beverage you enjoy after work with colleagues, but instead means Applicable Large Employer or those employing 50 or more full-time employees. Full-time employees are those working 30 hours or more per week. Like the income regulations, counting employees is not a simple matter, especially if an organization employs seasonal workers or has employees with highly variable hours. Regulations to the rescue. The final regulations provide two methods for determining whether an employee has sufficient hours: the Monthly Method and the Lookback Method.

Forms to File

The new code sections introduce new forms for meeting the reporting requirements of the ACA. ALEs will furnish Form 1095-C  to employees. For convenience, employers may send the 1095-C along with the employee’s W-2, although that is not required. Employers will send a copy of each employee’s 1095-C to the IRS along with the transmittal form 1094-C.

Software

Complying with the ACA reporting regulations requires information on hours employees worked, information on which coverage is offered, and premiums at which minimum value is offered for each month. This information may be tracked in different systems. Employee hours may be tracked in a payroll system while benefit information may be housed in the HRIS system. Key questions to ask when considering software solutions are:

  1. Are employee hours tracked daily for hourly and salaried employees?
  2. Is dependent information easily updated by employees?
  3. Are benefit premiums integrated with payroll data?
  4. Does the software have an entry form for completing Form 1095-C Part II?
  5. Does the software offer electronic filing options?
  6. Are reports available for verifying employee hours, personal information, and dependent information?

Having the right software solution can greatly reduce the frustration involved with complying with the complicated requirements of the ACA. In addition, a business partner to support your team during the process could help make a daunting task achievable. We would love to be that team for you. We have many years of experience in accounting software for the nonprofit and governmental sectors. Our years of experience, study, and in-depth industry knowledge give us the edge of quickly learning how to implement the best solution in your situation. Contact us to learn more.

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