While the majority of provisions under the Affordable Care Act (ACA) apply to applicable large employers (ALEs), there are requirements, as well as benefits, that apply to small employers, those with fewer than 50 full-time employees, including full-time equivalents (FTEs).
READ MORE: What You Need to Know about ACA
Health Coverage Options Program (SHOP)
ACA established the Small Business Health Options Program (SHOP) marketplace to help small businesses provide health coverage to their employees.
Requirements. In order to offer a SHOP health plan, the small businesses must meet the following criteria:
- Have fewer than 50 full-time employees or full-time equivalents
- Offer coverage to all full-time employees
- Enroll at least 70 percent of employees
- Have an office or worksite located in the same state as their SHOP marketplace
Some states have different participation requirements, so it’s important to check with the program in your state.
Healthcare Tax Credit
By offering a SHOP plan to employees, eligible employers can offset a portion of premium costs through the Small Business Healthcare Tax Credit.
Requirements: To qualify, a small business must:
- Have fewer than 25 full-time employees, including full-time equivalents (FTEs)
- Have an average of annual employee wages less than $50,000* (*wage thresholds change based on the rate of inflation).
- Contribute at least 50 percent of the health insurance premiums purchased through the SHOP marketplace.
For certain businesses, this tax advantage can mean significant savings in health plan premiums. Here’s an example of how it works. A small employer, with 10 employees, pays a total of $250,000 a year in wages (or $25,000 per employee) and contributes a total of $70,000 toward health plan premiums, would qualify for a tax credit of $35,000 (50 percent of the employer's contribution).
Workplace Wellness Incentives
Under the health care law, small businesses can receive a reward for providing an employee wellness program and activities that support a healthier workplace.
ACA Reporting Requirements
Small employers are not subject to the requirements under the employer shared responsibility provisions, but do have reporting obligations as a provider of minimum essential coverage through a self-insured health plan.
Filing requirements for the 2019 tax year include:
- Form 1094-B: Employers must provide this summary of health coverage to employees by March 2, which is a 30-day extension from the original deadline of January 31.
- Form 1095-B: Form 1095-B includes information about health coverage for full-time employees. For the 2019 taxes, the deadline for filing both forms with the IRS is February 28, or March 31, if filing electronically.
- W-2 Reporting of Health Coverage Costs. Applicable employers are required to report the total cost of each employee’s health coverage on their W-2.
Is your small business considered an ALE? Reporting rules depend on the size of your workforce during the prior year, so it’s important to understand how to calculate your total number of full-time employees, including full-time equivalents.
READ MORE: Complying with ACA in 2020
In certain circumstances, a small business may be considered an Applicable Large Employer (ALE) and subject to the same shared responsibility requirements. For example, this can happen if the business meets the threshold guidelines when it’s combined with other companies under common ownership. Small businesses should seek professional advice to ensure it is meeting ACA reporting requirements. For a complete list of specific ACA tax provisions, visit www.irs.gov.
More Help for Small Businesses
Access to affordable and comprehensive health plans tops the list as one of the most important benefits for employees. But due to costs, compliance risks, and complex reporting requirements, health insurance in an ongoing challenge for small employers to provide.
An IRS-certified PEO, like Propel HR, can help. From time-consuming administrative HR tasks, identifying health plans, our team of HR experts can help you stay in compliance with the changing rules of ACA that can affect your small business.
PLEASE NOTE: This information is for general reference purposes only. Because laws and regulations are constantly changing, please check with the appropriate organizations or government agencies for the latest information and consult your employment attorney and/or benefits advisor regarding your responsibilities. In addition, your company or health plan may be exempt from certain requirements and/or be subject to different requirements under the laws of your state.
An IRS-certified PEO, Propel HR has been a leading provider of human resources and payroll solutions for more than 20 years. Propel partners with small to mid-sized businesses to manage payroll, employee benefits, compliance and risks, and other HR functions in a way that maximizes efficiency and reduces costs.