Employer Responsibility Under the Affordable Care Act
The Affordable Care Act has created new insurance requirements for employers. In short, the employer’s responsibility is based upon the number of employees on staff. Unfortunately, it’s not as straightforward as this may seem.
How Does the Employer Mandate Work?
Insurance is required for any full time equivalent employee. Many business owners don’t understand that “full time equivalent” doesn’t necessarily mean a body. There are rules to calculate what a full time equivalent employee is.
The current standard for a full time employee is a person who works at least 30 hours per week. Alternatively, a full time employee is an individual whose hours are equal to a minimum of 130 per month for 120 days in a year. Talk to your CPA before making this calculation.
In the past, there have been deductions on health insurance based on whether your business was a C corporation, an S corporation, or an LLC. There were rules restricting those deductions depending on your business form.
Today, the Affordable Care Act really looks at your responsibility to your employees. Once you have employees, you are potentially subject to the employer mandate. Although it has been pushed back since the Affordable Care Act was proposed, 2015-2016 appears to the be the timeline for the employer mandate to come into play.
The expectation is that employers are going to provide insurance to 95% of their employees. Your company is expected to cost share 60% of the coverage; employers are expected to bear this percentage of the cost so that the insurance is “affordable” to the employee. The out of pocket expense to the employee should not exceed 9.5% of their income. In addition, employers may also collaborate with companies such as Eden Health or other health carriers that can handle all matters related to employee health. These services may include insurance, doctor visits, or even onsite clinics for employees.
The Affordable Care Act has created a lot of insurance changes for employers. If you have questions about how ObamaCare affects your business, contact the experts at Baker Retirement & Wealth Management, PC. We are happy to provide advice and guidance for businesses regarding health coverage and other questions. Our team has been providing advice in the greater Evansville area for nearly thirty years.
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