How will new Affordable Care Act (ACA) requirements affect your business in 2020? The New Year delivered many regulatory changes and new mandates that could impact employers and their employee benefits.
Regulatory Changes & New Mandates
The Cadillac Tax has been repealed. A tax on high-cost health coverage, known as the Cadillac Tax, was eliminated at the end of 2019. The Cadillac tax would have imposed a 40 percent tax hike on the cost of employer-sponsored health benefits that exceeded mandated thresholds.
Employer Mandate for Affordability Decreases. As of Jan. 1st, employers that provide health insurance will need to contribute more to their employees’ health plan in order to comply with changes in ACA’s guidelines. Under ACA’s employer mandate, the rate decreased this year to 9.78 percent from 9.86 percent in 2019. According to the IRS, Section 4980H(b), employer health plans failing to meet the affordability and minimum value requirements can face a penalty of $3,750* per employee.
Distribute Healthcare Notices to Employees. Under ACA, employers, covered by the Fair Labor Standards Act (FLSA), must provide employees with a notice about the availability of health insurance through the marketplace exchanges in the state(s) where the employer operates, and employer-sponsored health insurance. Applicable employers, those with 50 or more full-time equivalent employees, can face a $2,500* penalty per employee if it fails to offer full-time employees the opportunity to enroll in minimum essential health coverage sponsored by the employer, and if one full-time employee obtains a tax credit for insurance purchased through an ACA marketplace.
Reporting Requirements. Under ACA, employers that provide health coverage to their employees are subject to annual reporting and must comply with additional rules depending on the number of full-time employees, or full-time equivalents, during the current year.
Applicable Large Employers (ALEs), employers with more than 50 full-time employees or full-time equivalents, are required to report information about their employee health coverage plan and information about the offer of coverage.
Filing requirements for the 2019 tax year include:
Form 1094-C: Form 1094-C is a summary of information for each ALE employer.
Form 1095-C: Form 1095-C includes information about health coverage for full-time employees and information about enrollment in health coverage for employers that sponsor self-insured health plans. In addition, ALEs are required to distribute Form 1095-C to all full-time employees by March 2, a 30-day extension from Jan. 31 deadline.
Mistakes, errors in calculating the number of FTEs, or failure to file both forms by Feb. 28, if filing by paper, or March 31, if filing electronically, can mean a fine of $540* per return.
* Penalty amounts are subject to change for each filing year.
More States Require Individual Health Insurance. While the individual mandate penalty for not having health coverage has been eliminated, many states have separate laws requiring health insurance. On Jan. 1, California and Rhode Island joined a growing roster of states which have enacted new legislation.
To Learn More. ACA compliance requires years of experience in employee benefits and extensive knowledge of ACA legislation. Changes are inevitable, and a certified PEO, like Propel HR, can help by assessing your current employee benefits program and recommend ways to reduce risks, save money, and stay ACA compliant.
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.